RE CA CE Ethics

Ethics
California
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VERSION 2022-12-30
CONTENTS
Segment 1: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Standards of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Federal and State Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Fair Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Conduct in Restraint of Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Disclosure of Loan Costs in Obtaining Financing and Closing a Transaction . . . . . . . . . . . . . . . . . 6
The Focus of State, Federal, and Regulatory Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
California Department of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Professional organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Segment 2: Ethical Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Client vs. Customer vs. Prospect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Major Areas of Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Segment 3: Prohibited Conduct With Respect to Clients and Customers . . . . . . . . . . . . . . . . 15
Misrepresenting Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Misrepresentation of Savings or Benefits that Might be Realized Through Use of a REALTOR® . 18
Misrepresentation versus Puffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Misrepresenting Existence of Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Disclosure of Company Policies Relating to Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Misrepresenting that Commissions are Not Negotiable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Misrepresenting Relationship with Individual Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Misrepresentation of Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Misrepresentation of Buyer's Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Altering a Document by Adding Unauthorized Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Misrepresenting the Form, Amount, or Treatment of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Misrepresenting Size of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Misrepresenting Property Permitted Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Misrepresenting Property (Security) Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Failure to Disclose Dual Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Failure to Submit Offers in Timely Manner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Presentation of Competing Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Failure to Submit Additional Offers after Seller has Accepted Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Disclosure of Existence of Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Obligations of Buyer's Broker after Buyer's Offer Has Been Accepted . . . . . . . . . . . . . . . . . . . . . . . . . 30
Preserving Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
I
Disclosures to be Made at Time of Listing with Respect to Agency Relationships . . . . . . . . . . . . . . 31
Disclosures when Entering into Buyer Broker Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Nondisclosure of Material Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Failure to Explain Offer Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Agreements Generated by Electronic Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Segment 4: A Licensee's Duty to the Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
No Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Providing Competent Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Ethical Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Use of the Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Offering Prizes, Inducements, and Free Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Offering Property For Sale Without Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Name of Firm Must be Disclosed in Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Disclosure of License Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Unauthorized Practice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Cooperation in Realtor® Professional Standards Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Segment 5: Duties to REALTORS® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Making False or Misleading Statements About Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Interfering with Agency Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
No Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Appendix - The National Association of REALTORS® Code of Ethics . . . . . . . . . . . . . . . . . . 54
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Duties to Clients and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Article 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Article 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Article 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Article 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Article 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Article 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Article 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Article 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Article 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Duties to the Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Article 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Article 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Article 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Article 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Article 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
II
Duties to REALTORS® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Article 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Article 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Article 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Appendix 2 - California Business and Professions Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
III
Segment 1: Introduction
Ethics is a set of governing moral values that comes down to what is considered as being fair and right.
Ethics is based on the principle that one should treat others fairly and be treated fairly by others. Ethics is
of extreme importance in the real estate industry.
The real estate industry has traditionally been organized around the concept of a buyer and seller being
brought together by an agent to achieve a successful closing of a transaction. The result of the closing is
that the real estate agent receives a commission, the buyer receives the property, the seller disposes of the
property, and the agent earns their commission. If the transaction does not close, and the agent does not get
paid, the interest of the agent can conflict with interests of the client. The interest of the agent to receive
a commission could influence their ethical decision-making process. In the long term, working only to be
paid, rather than in the best interest of the client, will likely harm the agent's business and isn't considered
ethical by industry standards.
In the real estate industry, beyond the legal and disciplinary issues that arise, unethical conduct is bad for
business, and ethical conduct is good business. It is in this context that all real estate licensees must evaluate
their conduct. Treating your clients ethically - as you would like to be treated - leads to a satisfied client
and more referrals. In addition, ethical behavior is always a good first line of defense in the event of legal
problems.
In your first reading assignment, you will explore the two major sources of ethical standards that apply to
the real estate practice. These two sources are industry professional organizations and the governmental
laws and agencies having jurisdiction over the real estate licensee. These are our learning objectives for this
section:
At the conclusion of this reading assignment, you will be able to identify the basic sources or standards
governing real estate licensee ethical conduct; explain how conduct creates satisfied customers who become
a great source of repeat and referral business, and recognize how treating clients in a fair and ethical manner
helps to prevent litigation.
Standards of Ethics
For the real estate industry, the ethical standards of conduct that all licensees should adhere to arise out of
two basic sources. These two sources are:
1. Industry professional organizations, such as the National Association of REALTORS®
2. Government laws and agencies having jurisdiction over the real estate licensee.
The real estate industry is largely self-governed through the National Association of REALTORS1
® and its adopted Code of Ethics and Standards of Practice (the "Code"). The Code is a written system
of standards for ethical conduct. It also contains statements designed to advise, guide, and regulate job
behavior. The local affiliates of the National Association of REALTORS® have been given the authority to
enforce the Code through education and training, and by addressing complaints arising from the public or
its members regarding alleged violations of the Code by a member. A copy of the Code can be found in the
OnlineEd File Cabinet2 .
Through the use of general civil laws and criminal laws that apply to business and
personal conduct, along with laws specific to the real estate profession, each state
also regulates the licensees within its borders. These state laws can be found in
various sections of the civil and criminal codes. The following are the most
important sources of rules and regulations for California:
• California Business and Professions Code: All California licensees when

acting in their capacity as real estate licensees within the meaning of Business
and Professions Code Section 10131 shall not engage in any conduct which would
subject the licensee to disciplinary action under Sections 10176 and 10177 of the
Business and Professional Code.
• California Department of Real Estate - Commissioner's Regulations: The Commissioner of the

California Department of Real Estate3 is empowered to adopt regulations for the administration
and enforcement of the Real Estate Law. These regulations have the authority and force of the law itself.
1 https://www.nar.realtor/
2 https://r.onlineed.com/pub/934.pdf
3 https://www.dre.ca.gov/
Standards of Ethics 2
Federal and State Legislation

There have been many issues that have led to federal legislation. Some of those more important issues are:
Fair Housing
A number of behavioral issues, such as discrimination based on race, color, religion, national origin, sex,
handicap, and marital status, have been the basis for a series of Federal Fair Housing laws. Many citizens of
the United States found it necessary to discriminate against certain people based upon certain characteristics.
These behaviors were based upon community cultural prejudices, religious beliefs, and often, ignorance. In
many communities, this behavior was not only sanctioned, but also encouraged. In order to modify this
unacceptable behavior, federal legislation collectively known as the Fair Housing Law(s), was passed to
address the discriminatory practices that were prevalent in many parts of the country. The Fair Housing
Laws may be collectively summarized as follows:
• Civil Rights Act of 1866: Prohibits discrimination based on race.
• Fair Housing Act (i.e., Title VIII of the Civil Rights Act of 1968): Prohibits discrimination in
housing based on race, color, religion, or national origin.
• Section 504 of the Rehabilitation Act of 1973: Prohibits discrimination against persons with
disabilities in any program or activity receiving Federal financial assistance. Any housing that receives
federal funds, in whole or in part, directly or indirectly (such as loan guarantees), falls within the scope
of this Act.
• Housing and Community Development Act of 1974: Prohibits discrimination in housing based
upon sex.
• Equal Credit Opportunity Act of 1974: Prohibits discrimination in lending based upon race, color,
religion, national origin, sex, age, marital status, and because a person may be on public assistance
income.
• Fair Housing Amendments Act of 1988: This act amends the Fair Housing Act by prohibiting
discrimination in housing based upon disability or familial status (presence of child under 18 and pregnant
women). The 1988 amendments also create an exemption to the provisions banning discrimination based
upon familial status for those housing developments that qualified as housing for persons age 55 or older.
In addition, the act strengthened the administrative and judicial enforcement process for HUD complaints
and provided monetary penalties in cases where housing discrimination was found.
• Title II of the Americans with Disabilities Act of 1990 (ADA): Title II of the ADA prohibits
discrimination against persons with disabilities in all services, programs, and activities made available by
State and local governments, including those that do not receive Federal financial assistance.
• The Housing for Older Persons Act of 1995 (HOPA): This act makes several changes to the 55
and older exemption provided for in the 1988 Amendments to the Fair Housing Act.
3 Federal and State Legislation

Taken as a whole, the Federal Fair Housing Laws protect seven classes of
persons. These seven protected classes are:
• Race
• Color
• Country of national origin
• Religion
• Sex
• Handicapped individuals (disability)
• Familial Status (families with children under 18 and pregnant women)
All of the Federal Fair Housing laws have had the effect of making available to all citizens of the United
States, who are of similar financial means, a marketplace where all have the right to live where they may
choose. All those involved in real estate must comply with the intent and provisions of the Fair
Housing Law, including private property owners, real estate licensees, property managers and property
management companies, builders, developers, or lenders. Personal prejudices regarding any of the protected
classes are prohibited. There are often many social, religious, and other pressures arising out of centuries of
discriminatory practices which, for some, are hard to overcome.
California has enacted laws and developed regulations that in many cases parallel the Federal Fair Housing
laws but in other cases have expanded the nondiscriminatory concepts of fair housing and employment laws.
The major California fair housing and employment laws are:
• California Civil Code Section 53: Prohibits restrictive covenants.
• The Unruh Civil Rights Act: Prohibits all arbitrary discrimination by business establishments.
Business establishments are defined very broadly to include rental property owners, real estate brokerages,
property management companies, and homeowner associations. The protected classes closely parallel the
Federal Fair Housing laws.
• Rumford Act: Also known as the California Fair Employment and Housing Act, it essentially prohibits
discrimination based on age, sex, race, color, religion, ancestry, national origin, disability, and/or familial
status in the areas of employment and housing. It further prohibits discrimination in the sale, rental,
lease and/or financing of virtually all types of housing, with the exception of single family houses with
no more than one roomer or boarder.
• Department of Real Estate Commissioner's Regulations: The California Real Estate Commis
sioner has issued regulations known as Section 2780. These regulations define discriminatory conduct in
the sale, rental, or financing of real property as a basis for licensee disciplinary action if the licensee's
actions are based upon race, color, sex, religion, ancestry, physical handicap, marital status, or national
origin.
• The Holden Act: Prevents discrimination in the financing of residential real estate.
Under federal and California law, persons with these characteristics, or belonging to these classes, are
protected from illegal discrimination in housing:
Federal and State Legislation 4

1. Race
2. Color
3. Religion
4. Sex (biologically assigned at birth; includes sexual harassment; ex: male, female)
5. Gender (social and legal status set by society about behavior, characteristics, and thoughts based on sex;
ex: male, female, non-binary)
6. Gender Identity (how you feel inside, may not align with sex; ex: transgender, cisgender)
7. Gender Expression (how you outwardly express your gender, may not align with sex)
8. Sexual Orientation (sexual identity in relation to the gender you are attracted to; ex: heterosexual,
homosexual, bisexual, pansexual)
9. Marital Status (ex: married, unmarried persons living together)
10. National Origin (your country of birth)
11. Ancestry (country of your parent's birth)
12. Familial Status (includes pregnant women; families with children under age 18)
13. Source of Income (includes Section 8 and VASH vouchers)
14. Disability (mental and physical)
15. Age (exception for senior housing; typically related to familial status)
16. Medical Condition
17. Genetic Information
18. Citizenship
19. Primary Language
20. Immigration Status
21. Military or Veteran Status (effective January 1, 2020)
22. Arbitrary characteristics as protected under Unruh
23. Individual perceived to be a member of protected class
24. Individual associated with any members of protected class
GC §12900 et seq.; 42 U.S.C. §3601 and et seq.; Cal. Civ. Code (CC) §51; 2 CCR §12005(y)
5 Federal and State Legislation

Conduct in Restraint of Trade

In the early 1900s, pools and trusts were formed to deal with brutal business
competition. In the United States, where free competition had become the ac
cepted path to progress, the government for a long time was forced to give its tacit
sanction to consolidations of every sort. At the same time it seemed to impose
restraints on monopolistic tendencies. The Sherman Anti-Trust Act of 1890 was
the first in a series of restrictive federal measures, which was a reflection of the
growing public opposition to the "artificially" raised prices and "artificially" closed
opportunities that the trust brought about. The result of anti-trust legisla
tion is to prevent activity such as price fixing. An example of price fixing
conduct in the real estate industry is when brokers would get together and try to
fix commission rates. Even the discussion of commission rates is dangerous and
could be interpreted as price fixing. Any attempted discussions about fixing commissions or other uniform
business practices by competitors should be openly rejected to avoid the appearance of participation in the
conspiracy.
Disclosure of Loan Costs in Obtaining Financing and

Closing a Transaction
In the past the conduct of lenders and real estate agents with respect to costs associated with obtaining a
loan and closing a transaction was often shady at best. Often there were kickbacks, undisclosed fees, and
characterization of certain costs and fees in such a way as to prevent their disclosure. In order to address
these less than ethical types of conduct, Congress passed the Real Estate Settlement Procedures Act4
(RESPA). It clearly sets forth the rules and permitted conduct with respect to loans and transaction closing
practices.
The Focus of State, Federal, and Regulatory Agencies

As has been demonstrated, the basis for ethical conduct and practice in the real estate industry often has
its roots in laws passed at the federal and state levels or rules created by regulatory agencies based
on legislation.
4 https://www.hud.gov/hudprograms/respa
Federal and State Legislation 6

Obviously, the Code of Ethics and the state laws governing the prac
tice of real estate may often overlap. Most conduct that is prohibited by
law is also unethical. Most conduct that is not prohibited by law is probably
not unethical. However, there may be some "gray area" in which conduct may
not be explicitly prohibited by law but may still be considered unethical.
California Department of Real Estate

The primary mission of the California Department of Real Estate
(DRE) is the protection of the public in real estate transactions.
Therefore, the DRE's major concerns relate to the following issues:
• Misrepresentation
• Failure to Disclose Material Facts
• Trust Funds
• Conflict of Interest
Professional organizations
Professional organizations such as the National Association of REALTORS® and its local affiliates are also
concerned about many of the same issues as the DRE. However, the focus of these organizations is
often on the more practical issues of how its members present themselves to the public and
how its members deal with each other. Therefore, these professional organizations also focus on ethical
issues relating to:
• Advertising
• Multiple listing service internal rule violations
• Conflicts of interest between its members
In order to organize a discussion of ethical conduct as applied to the practice of real estate, this course will
follow the general outline of the National Association of REALTORS® Code of Ethics and Standards of
Practice. In so doing, ethical issues will be addressed in the following topical areas:
• Ethical conduct with respect to clients and customers
• Ethical conduct with respect to the general public
• Ethical conduct with respect to other REALTORS®
Where appropriate, federal or state law will be referenced so that the reader may understand how intertwined
the Code of Ethics is with federal and state law.
7 The Focus of State, Federal, and Regulatory Agencies

The ethical standards of conduct which licensees should adhere to arise out of two basic sources:
industry professional organizations and the governmental laws and agencies having jurisdiction
over the real estate licensee.
The Focus of State, Federal, and Regulatory Agencies 8

Segment 2: Ethical Conduct
Licensees are to protect and promote the interests of the client. The REALTOR® Code Standard of Practice
1-1 says that the duties imposed by the Code of Ethics are to encompass all real estate activities whether
conducted in person, electronically or through any other means. This obligation is based on the law of
agency and the fiduciary duties that arise out of the principal and agent relationship.
The common law fiduciary duties each agent owes their principal are care, loyalty, obedience, accounting, and
disclosure. The ethical responsibilities of an agency relationship are the basis for the conduct of a licensee
in their dealings with clients and customers.
The high standard of conduct required by agency fiduciary duties elevates the level of expected conduct
beyond the basic requirements of real estate law. In addition to the fiduciary duties owed to a client, a
licensee also has an obligation to treat all parties honestly who are involved in the transaction.
Your next reading assignment will examine the relationship distinction between a licensee and client or
customer. We focus on the ethical concerns relating to misrepresentation, nondisclosure, and conflicts of
interest. These are our learning objectives for this segment:
At the conclusion of your next reading assignment, you will be able to distinguish between client and customer
status; and explain the concepts of misrepresentation, nondisclosure, and conflicts of interest.
Client vs. Customer vs. Prospect
REALTOR® Code Standard of Practice 1-2: As used in this Code of Ethics, "client" means
the person(s) or entity(ies) with whom a REALTOR® or a REALTOR®'s firm has an agency or
legally recognized non-agency relationship; "customer" means a party to a real estate transaction
who receives information, services, or benefits but has no contractual relationship with the RE
ALTOR® or the REALTOR®'s firm; "prospect" means a purchaser, seller, tenant, or landlord
who is not subject to a representation relationship with the REALTOR® or REALTOR®'s firm;
"agent" means a real estate licensee (including brokers and sales associates) acting in an agency re
lationship as defined by state law or regulation; and "broker" means a real estate licensee (includ
ing brokers and sales associates) acting as an agent or in a legally recognized non-agency capacity.
(Adopted 1/95, Amended 1/07)
These three terms need to be defined to understand the duties and obligations owed to clients, customers
and prospects.
• Client: The Code of Ethics Standard of Practice 1-2 defines a client as the person or entity with whom
the licensee has a legally recognized agency relationship. The agency relationship may be created in any
one of the following ways:
• By express (written) or implied (verbal) agreement as evidenced by the parties' words and conduct
or the surrounding facts and circumstances might create the relationship of principal and agent.
• By the principal's ratification of an agent's previously unauthorized act.
• By estoppel, which results when a principal either intentionally or negligently causes a third party to
believe that another person is the principal's agent, causing the third party to rely upon that belief.
• Customer: A customer receives information or services from a licensee but has no contractual relationship
with the licensee. A customer is owed no fiduciary duties. However, the licensee owes to the customer
fair and honest dealings and disclosure of material facts.
Historical Note: In most areas of the country before the 1980s, the real estate industry, through
their local multiple listing services, required that all licensees be agents of the seller. This meant
that even the licensee who worked with the buyer was in an agency relationship with the seller and
not the buyer. Under this arrangement, the agent working with the buyer owed all fiduciary duties
to the seller and only the obligation of fair and honest dealing to the buyer.
• Prospect: The Code of Ethics Standard of Practice 1-2 defines a prospect as a purchaser, seller, tenant,
or landlord who is not subject to a representation relationship with a licensee.
Today, multiple listing services and the laws of most states recognize that even though the seller is paying the
commission to the buyer's agent, the relationship between the seller and the licensee representing the buyer
is NOT one of principal and agent. Therefore, the fiduciary duties of the buyer's agent are owed exclusively
to the buyer and not to the seller.
A client is a legal person with whom the licensee has a legally recognized agency relationship. The
client is owed fiduciary duties. A customer receives information or services from a licensee but has
no contractual relationship with the licensee. A licensee owes the customer honesty, good faith,
and fair dealings (including the disclosure of known material defects) but not any of the fiduciary
duties.
Client vs. Customer vs. Prospect 10

Major Areas of Concern

State law and the REALTOR® Code of Ethics address many ethical concerns. These concerns can be
summarized as:
• Misrepresentation
• Nondisclosure
• Conflict of Interest
In many cases, misrepresentation can also be an issue of nondisclosure or a conflict of interest.
Suppose a licensee has three offers on their listing and only delivers one to the client to avoid con
fusing the client. In that case, the licensee is engaged in misrepresentation of their client by not
disclosing the other two offers.
Misrepresentation
The courts have traditionally defined misrepresentation
as knowingly making a false statement upon which an
other may rely to their detriment. However, the courts
have expanded this basic standard to include what a licensee
should know. Therefore, in addition to knowingly making a
false representation to either a client or customer, a represen
tation made with a reasonable basis for believing its truth may
also be misrepresentation. The REALTOR® Code of Ethics,
and the State of California Business and Professions Code and
the California Department of Real Estate's Commissioner's Reg
ulations address many common areas of misrepresentation.
This section of this course will address misrepresentation following the basic outline of the REALTOR® Code
of Ethics and Standards of Practice. The basic California Real Estate Law dealing with misrepresentation
is found in the Business and Professions Code in Section 10176. The code prohibits the following:
• Making any substantial misrepresentation. 10176 (a)
• Making any false promises of a character likely to influence, persuade, or induce. 10176 (b)
• A continued and flagrant course of misrepresentation or making false promises through real estate agents
or salesmen. 10176 (c)
• Conduct which constitutes fraud or dishonest dealing, whether of the same or a different character than
specified in this section. 10176 (i)
11 Major Areas of Concern

Although code section 10176 does not identify or list specific acts of conduct that are prohibited, the broad
language of the law clearly is intent on prohibiting all attempts to misrepresent.
Misrepresentation can also rise to the level of fraud. Lawsuits against sellers and real estate agents
based on fraud are based upon the premise that liability should result from either an affirmative or intentional
misrepresentation or from a negative or nondisclosure of a fact.
The California Civil Code defines actual fraud as:
Actual fraud, within the meaning of this Chapter, consists in any of the following acts, committed by a
party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce
him to enter into the contract:
1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
2. The positive assertion, in a manner not warranted by the information of the person making it, of that
which is not true, though he believes it to be true;
3. The suppression of that which is true, by one having knowledge or belief of the fact;
4. A promise made without any intention of performing it; or,
5. Any other act fitted to deceive.
The California Civil Code defines constructive fraud as:
1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person
in fault, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of
any one claiming under him; or,
2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual
fraud.
Unethical conduct may also arise out of the negligent acts of a licensee. Unethical conduct based upon
a negligence theory is the concept that a licensee can be held liable for not exercising ordinary
care and skill in the conduct of their real estate practice, which in turn leads to their client being
damaged economically. The fiduciary duties required by an agency relationship demands the exercise of a
high standard of care. Licensee conduct that falls below the high standard of care requirement is often based
upon conduct that is considered negligence.
The California Civil Code Section 1714 statutorily defines negligence as:
Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned
to another by his or her want of ordinary care or skill in the management of his or her property or person,
except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself or
herself. The design, distribution, or marketing of firearms and ammunition is not exempt from the duty to
use ordinary care and skill that is required by this section. The extent of liability in these cases is defined
by the Title on Compensatory Relief.
Misrepresentation is knowingly making a false statement upon which another may rely to their
detriment.
Misrepresentation 12
Nondisclosure
Related to misrepresentation is the concept of disclosure or nondisclosure of a material fact. As a rule, the
real estate licensee has a duty to disclose facts that are material to the prospective purchaser.
Material facts are those that would be likely to affect the conduct of a reasonable person. While some
material facts are a matter of law, others will vary with the facts of each transaction. A fact is material if
the offering party would not have entered the contract or would have contracted for less had the fact been
known.
A fact is material if the offering party would not have entered the contract or would have con
tracted for less had the fact been known.
The determination as to what material facts are is not always simple. In addition, with respect to
the real estate agents involved in the transaction, which agent (listing or selling) has the burden to disclose
and to whom? If the listing agent is working in the best interest of the seller, where does the obligation
to disclose to the buyer actually harm the seller? These are complex issues and often ones that present no
readily available legal answer. Recent case law and legislative actions have given the answers to some of
these questions. However, as in many areas of the law, not all questions have concrete answers.
Since the Easton v. Strassburger (152CA3d90) court case, it is clear that a licensee in California must
disclose to a buyer those facts which could have been known about a property if reasonable due diligence
had been exercised. The California Court of Appeals clearly held that the real estate agents were "negligent"
in not disclosing a "material fact" to the buyer, which the agents "should have known" if "reasonable due
diligence would have been exercised." The California legislature codified the principles of the Easton case
in California Civil Code Section 2079-2079.6. The code section requires a real estate licensee to "conduct a
reasonably competent and diligent visual inspection of the property offered for sale" and to disclose the facts
that such an investigation would reveal. To not conduct a reasonably competent and diligent visual
inspection of the property being offered for sale would be negligence and would be a failure
to disclose facts deemed material.
The California Civil Code requires a real estate licensee to "conduct a reasonably competent and
diligent visual inspection of the property offered for sale" and to disclose the facts that such an
investigation would reveal.
Therefore, a licensee has a duty to make full and complete disclosure of all material facts that might influence
the principal. Any licensee who fails to disclose material facts, in most cases, will do so based upon conduct
that is considered fraudulent. It does not matter whether the withholding of a material fact was intentional
or not intentional as the fraud committed will either be actual or constructive. As seen in the discussion
above, failure to disclose is a form of misrepresentation. The failure to disclose, as in misrepresentation,
may be based upon conduct that is based upon negligence. As will be seen in the discussion which follows,
failure to disclose material facts can include numerous issues ranging from failure to disclose agency status
to failure to submit additional offers after a Seller has accepted an offer.
13 Nondisclosure
Conflict of Interest
The fiduciary duty of loyalty requires licensees to avoid situations that can lead to conflicts of interest with a
client and requires licensees to place the interests of their principal above all others. Some of the implications
of this duty are:
• Confidential information gained from a principal cannot be disclosed. A seller's licensee cannot disclose
the financial condition of a seller, a seller's willingness to take a lesser price, a seller's desperation to sell,
etc. unless authorized.
• Licensees must disclose their interest in a property that is for sale and disclose when they are making an
offer on property for their own account.
• A divided agency, also known as an undisclosed dual agency, where licensees act on the account of an
adverse party without the principal's knowledge or consent is prohibited.
• Competing with a principal for a licensee's account, or for another, in matters relating to the subject
of the agency is prohibited. An example would be a licensee taking an underpriced listing and then
purchasing the listing.
We discuss the duties licensees owe to clients and conflicts of interest in the next course segment.
Conflict of Interest 14
Segment 3: Prohibited Conduct With
Respect to Clients and Customers
Let's now take a look at the REALTOR® Code of Ethics and Standards of Practice. The Code of Ethics is
organized into three topic areas:
1. Prohibited conduct with respect to clients and/or customers
2. Duties owed to the public
3. Duties owed to REALTORS®
The next reading assignment focuses on prohibited conduct with respect to clients and customers and
references to specific Codes of Ethics to which the discussion topic applies, as well as the relevant statutes
that may apply to the particular prohibited conduct.
After you complete this reading assignment, you will be able to discuss and explain the numerous prohibited
conduct situations relating to clients and customers.
Misrepresenting Market Value

References:
REALTOR® Code of Ethics
Standard of Practice 1-3
REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market
value.
Licensees are not permitted to make false representations as to the value of a seller's property in an attempt
to secure listings. Licensees sometimes violate this ethical standard when they are in competition for listings.
While every seller wants to get the most they can for their house, it is unethical to represent that the listing
price should be higher than reasonable facts can justify.
When a licensee buys a listing because a seller does not understand statistical market value, that seller is
led to believe that the licensee who is suggesting the highest listing price is superior to those licensees who
are fair and honest about pricing. In reality, the licensee who listed the property knows that the property
Segment 3: Prohibited Conduct With Respect to Clients and Customers
will not sell, but hopes to win the listing and then get price reductions to bring the price in line with reality;
the reality originally presented to the seller by the ethical licensees.
Misrepresenting Market Value 16

Sellers can also instigate overpricing. Licensees are not prohibited

from taking listings when this happens, but should still fulfill their
ethical responsibility of making sure sellers understand the statis
tical market value.
Overpricing by sellers occurs when an emotional opinion about

value is formed. Sellers who have positive memories of a prop
erty can translate the memories into a perceived higher value than
can be statistically justified. Human nature also tends to cause
sellers to compare their properties to others, upgrading their own
and downgrading the competition.
Licensees who agree with sellers who have inflated opinions of value, knowing them to be unfounded, are
engaging in unethical conduct. That does not mean licensees shouldn't take these listings; rather, these
sellers should still receive a professional opinion of value based on market data. Value opinions should also
include a conversation of the pitfalls to overvaluing, and that pricing will probably have to be reduced to
entice offers.
Misrepresentation in an attempt to secure a listing can also occur when intentionally undervaluing listings
to benefit from flipping the property.
Real estate agent Juan lists a property at $425,000 that has a fair market value of $450,000. Juan
then makes an offer to buy the property at the listed price (either directly or indirectly through a
friend, spouse, or another person), and then immediately resells the property for its actual statisti
cal market value.
It is the licensee's ethical responsibility to inform a seller of the real value of their property and
then to let the seller decide on the final price.
Licensees representing buyers cannot misrepresent property value as an inducement to make an offer.
Real estate agent Tina selects a few high-priced comparables to show her seller to justify a higher
offering price instead of using information about all the available comparable properties. Tina's
acts misrepresent the statistical value of the property and could result in a buyer paying more for
a property than it is worth.
Undervaluing a property prevents the seller from realizing the full economic potential of their property.
Overvaluing the property deprives the seller of the opportunity to have buyers consider the property for
purchase. Manipulating market data in any way, whether for a seller or buyer, is a misrepresentation and
unethical.
17 Misrepresenting Market Value

Licensees are not permitted to make false representations of value in an attempt to secure listings
or entice buyers to pay more than is justified by market data.
Misrepresentation of Savings or Benefits that Might be

Realized Through Use of a REALTOR®
References:
REALTORS®, when seeking to become a buyer/tenant representative, shall not mislead buyers or tenants
as to savings or other benefits that might be realized through the use of the REALTOR®'s services.
(Amended 1/93)
In attempting to represent a buyer or tenant, a REALTOR must not mislead the buyer or tenant as to
potential savings or benefits that might be realized through the use of a REALTOR.
Although a buyer or tenant who is represented by a REALTOR will benefit from the relationship, the buyer
or tenant might end up paying more for the property when the seller or landlord includes the REALTOR's
fee in their pricing.
Do not mislead a buyer or tenant as to potential savings or benefits that might be realized
through the use of a REALTOR.
Misrepresentation versus Puffing

References:
Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the
property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in
the property, to advise on matters outside the scope of their real estate license, or to disclose facts which
are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended
1/00)
Misrepresentation of Savings or Benefits that Might be Realized Through Use of

a REALTOR® 18
In many ways, the distinction between a misrepresentation and puffing is very subtle. Puffing should be
considered sales speak that is intended to induce interest but is not necessarily a fact upon which a reasonable
person would rely. Examples of puffing would be as follows:
• "Our real estate company is the best in town."
• "This house is the best buy in the city."
• "This house is simply beautiful."
There is a point at which the line gets crossed from puffing to outright misrepresentation. An outright
misrepresentation is a false representation by a licensee made with knowledge of its falsity or by making a
representation without a reasonable basis for believing its truth. The usual standard the court applies to
make the distinction between puffing and misrepresentation is whether a reasonable person would have relied
upon the statement to make a decision. The closer the statement moves from an opinion to a statement of
fact; the more likely a reasonable person will rely on it to make a decision.
A misrepresentation occurs in listing situations when a licensee tells a seller that their office has
buyers for the property when they don't have any. The specific intent of inducing the seller into a
listing contract by dangling a false and quick sale is unethical and a misrepresentation. If the li
censee said, "Our company works with many buyers who would appreciate this property," then the
statement would be considered puffing, as it does not misrepresent the actual status and interest
of the company's customers.
Once a licensee moves beyond puffing to leading the seller to believe that there exists a real buyer
who will make an offer on the property just as soon as it is listed, the statement becomes a mis
representation. Licensees must be careful not to cross the line from puffing to misrepresentation.
Misrepresenting Existence of Offers

References:
Article 2
To increase the offering price of a property listing by claiming that there are other offers, when in fact there
are not, is unethical.
It is an ethical violation to represent that there are offers to purchase a property when, in fact, the
licensee does not have in their possession a bona fide written offer to purchase at the time of the
representation.
19 Misrepresentation versus Puffing

Disclosure of Company Policies Relating to Commissions

References:
Standard of Practice 1-12, 1-13, and 3-4
When entering into listing contracts, REALTORS® must advise sellers/landlords of:
1) the REALTOR®'s company policies regarding cooperation and the amount(s) of any compensation that
will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency
capacities;
When entering into a listing contract, the listing licensee must advise the seller on how the commission paid
by the seller will be allocated between the listing and selling brokerages.
The listing agent is charging the seller a 6% fee and must disclose to the seller how the fee will be
split with the buyer agent. For example, 3% will be paid to the buyer broker.
This code section requires that the licensee discloses to the seller how the total fee will get split. Without
this disclosure, the seller remains unaware that the offered commission to the selling agent could compromise
the successful sale of the property within the shortest period.
It is not uncommon for a selling agent to enter into a buyer representation agreement that requires the
payment of a minimum fee. In this type of arrangement, it is also not uncommon for the buyer to limit the
showings to those properties wherein the listing agent is offering a commission split at least equal to the
minimum fee agreed on in the buyer representation agreement.
When entering into buyer/tenant agreements, REALTORS® must advise potential clients of:
... 4) any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g., listing broker,
subagent, landlord's agent, etc.; and
Standard of Practice 1-13 also requires that the listing agent advises the seller of the potential for the selling
agent to act as a disclosed dual agent. This situation arises in cases where under state law the selling agent
would be a dual agent if the selling agent is licensed with the same company as the listing agent.
REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or
variable rate commission arrangements (i.e., listings where one amount of commission is payable if the
listing broker's firm is the procuring cause of sale/lease and a different amount of commission is payable if
the sale/lease results through the efforts of the seller/landlord or a cooperating broker). The listing broker
shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers
and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in
a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the
cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such
information to their client before the client makes an offer to purchase or lease. (Amended 1/02)
Disclosure of Company Policies Relating to Commissions 20

Under Standard 3-4, the listing broker has an affirmative oblig

ation to disclose the existence of dual or variable rate commis
sion arrangements to cooperating brokers. These dual or variable
rate commission arrangements typically provide that one amount
of commission is payable if the listing agent is the procuring cause
of the sale and a different amount of commission is payable if the
sale results through the efforts of the seller or a cooperating agent.
Once this information is disclosed to the cooperating agent, that
agent has an obligation to disclose this information to their buyer
before making an offer to purchase.
All of the above commission-related standards have as their main

purpose the disclosure of how the commissions are to be allocated to all parties involved in a transaction.
Although commission amounts are not supposed to influence a transaction, they do become an important
and practical consideration for many licensees.
When entering into a listing contract, a licensee must advise the seller how the commission paid
by the seller will be allocated between the listing and selling brokerages.
Misrepresenting that Commissions are Not Negotiable

References:
The Sherman Antitrust Act
Article 2
A licensee may not state or imply that they are precluded (by law, regulation, or rules of any organization
other than that of the licensee's firm) from charging less than the commission or fee quoted to a property
owner by the licensee.
In the past, many local real estate boards and/or multiple services suggested commission schedules that were
to be used by their members. To comply with the provisions of the Sherman Antitrust Act, such suggested
fee schedules were voluntary. The ostensible purpose of these schedules was to notify the public that fees
exceeding these suggested fees were possible gouging. However, more often than not, licensees used these
suggested schedules as a tool to not lower the listing fee. The licensee would claim, "Our multiple service
does not allow a lower fee," thereby forcing sellers into believing that fees were not negotiable. The practice
of the MLS establishing a fee schedule remains a questionable restraint of trade activity under the Sherman
Antitrust Act. In addition, such a statement by a licensee would be a misrepresentation.
While a licensee's brokerage may have specific fee requirements, brokerages cannot agree
among each other to a specific fee schedule. The area of fixed fees is of such great concern that
Business and Professions Code Section 10147.5 forbids the printing of the commission rate in a brokerage's
preprinted listing agreement form, as that could lead a seller to believe that the fee is not negotiable. BPC
Section 10147.5 also requires that the following language be included in all listing agreements in bold type:
21 Disclosure of Company Policies Relating to Commissions

NOTICE: Law does not fix the amount or rate of real estate commissions. They are set by each
broker individually and may be negotiable between the seller and broker.
Some brokerages may offer Fee for Services representation instead of commissions. Many of the Fee for
Services schedules represents greatly reduced fees when compared with traditional brokerage commission
schedules. No licensee should make any representation to any seller that such fee for service schedules are
against the law or not permitted by the local multiple listing service.
A licensee may not state or imply to a property owner during listing negotiations that the licensee
is precluded by law, regulation or rules of any organization other than that of the licensees firm,
from charging less than the commission or fee quoted to the owner by the licensee.
Misrepresenting Relationship with Individual Broker

References:
Article 2
A licensee may not represent to a seller, a buyer, or to the public that they are associated with a broker when
that association does not exist. While seemingly obvious, many licensees are caught in misrepresentations
with respect to their broker or brokerage affiliation.
A licensee who is currently affiliated with Broker A but is planning to affiliate with Broker B is at
a listing appointment. During their presentation, the licensee misrepresents to the seller that they
are already affiliated with Broker B.
A licensee is affiliated with a broker who is a member of a national franchise that many sellers and
buyers associate with performance and security. Because of the implied power of this franchise,
the licensee leads a seller or buyer to believe that they are protected by the franchise organization.
A representation such as this is untrue, unethical, and a violation of law.
A licensee may not represent to a seller, buyer, or the public that they are associated with a bro
ker when that association does not exist.
Misrepresenting that Commissions are Not Negotiable 22

Misrepresentation of Closing Costs

A licensee cannot underestimate or understate the probable closing costs for either a buyer or seller with the
intent to induce the buyer to make an offer or to induce the seller to accept an offer.
To avoid discussions or make misrepresentations about closing costs with a client is conduct that is designed
to mislead. Conduct designed to deceive and careless guesses are considered to be negligent behavior that is
intentionally designed to misrepresent.
A licensee is not to underestimate or understate the probable closing costs for either a buyer or
seller.
Misrepresentation of Buyer's Qualifications

A licensee cannot misrepresent the qualifications of a buyer.
A misrepresentation would occur when a seller agrees to carryback financing, and the buyer's broker rep
resents the buyer to be financially sound when there is no basis to make this representation or when this
representation is designed to mislead. Licensees should always provide documentation from a lender or
mortgage professional when making financial representations about their buyer.
Another example of a misrepresentation would be when a licensee represents to a seller that the buyer is
prequalified or approved for financing when the buyer is not. If the seller accepts an offer relying upon these
false representations, takes the property off the market, and then later is confronted with the buyer's lack of
ability to obtain a loan, the seller would have a justifiable suit for damages based on the misrepresentation
of the licensee. Licensees should always confirm prequalifications prior to making financial representations
about their buyer.
A licensee is not permitted to misrepresent the qualifications of a buyer.
23 Misrepresentation of Closing Costs

Altering a Document by Adding Unauthorized Changes

Any alteration of a document is a form of misrepresentation. A licensee cannot alter a document by making
additions or modifications to a previously signed or initialed document without the consent of the party
that the licensee represents. A licensee may be tempted to justify an unauthorized modification because
it is minor or is in the best interest of the party they represent, such as a missed initial or date change.
An alteration can occur in one of two ways, either addition or deletion of information or terminology or by
altering existing information or terminology. Any modification of a document without the consent of the
party to the document is unlawful and outside the scope of the agency relationship.
Any modification to a document without the consent of the party to the document is unlawful.
Misrepresenting the Form, Amount, or Treatment of

Deposits
A licensee cannot misrepresent the form, amount, or treatment of earnest money deposits.
Example: A licensee acknowledged the receipt of earnest money for $2,000 from the buyer. The
buyer tendered a promissory note for earnest money to be redeemed on the seller's acceptance of
the buyer's offer, and the licensee does not disclose that the earnest money deposit is a promis
sory note. In leading the seller to believe that they have received actual earnest money instead of
a promise to pay earnest money, the licensee is misleading the seller.
It is against the law to misrepresent where the brokerage deposits their earnest money collected from their
clients. Individual state laws are particular about handling trust funds.
Misrepresenting Size of Property

Licensees should not make representations about the size of a property or the location of property boundary
lines based on an unsupported belief. A proper response to a property boundary or size question is to inform
the buyer that a survey is the only way to determine size and boundaries.
Another area of common misrepresentation relates to the square footage of a structure. Licensees are
cautioned not to make representations regarding property size (parcel or structure) or boundaries without
a reasonable basis for believing the truth of the representations, such as a survey or appraisal. To make a
representation without a reasonable basis for believing the truth of the representation exposes the licensee
to making a false representation.
Misrepresenting the Form, Amount, or Treatment of Deposits 24

A licensee should not make any representations about property size (parcel or structure) or a
boundary without a reasonable basis for believing the truth of the representations.
Misrepresenting Property Permitted Uses

A licensee should not knowingly make a false or misleading representation regarding a permitted use of a
property to a prospective buyer with the intent of inducing that buyer to purchase.
Example: A licensee represents to a buyer that they should be able to operate an import/export
business from the house they are considering buying since there won't be any customer traffic
caused by the business. If the buyer purchases the house but then finds out that they cannot con
duct this type of business because delivery trucks are prohibited in the neighborhood, then the
licensee misrepresented the permitted use of the property.
Misrepresenting Property (Security) Value

A licensee is not allowed to make a representation (either as principal or agent) to a prospective purchaser of
a promissory note secured by real property about the market value of the property securing the note without
a reasonable basis for believing the truth of the value assertions.
Example: A buyer is offering to buy a property for $100,000 with a $10,000 down payment and
the balance of $90,000 secured by a promissory note and first deed of trust on another property
owned by the buyer. The buyer's licensee represents to the seller that the value of the property of
fered as security is more than adequate, but has no reasonable basis to support this assertion, such
as an appraisal or another professional value opinion. To make a representation such as this when
it isn't factual can cause serious financial harm to the seller and is a careless misrepresentation by
the licensee.
25 Misrepresenting Property Permitted Uses

Failure to Disclose Dual Agency

References:
REALTORS® may represent the seller/landlord and buyer/tenant in the same transaction only after full
disclosure to and with informed consent of both parties. (Adopted 1/93)
Historically, most multiple listing services required that all agents represent the seller. To represent the
seller meant that the listing licensee and any licensees working with a buyer worked for the seller and not
the buyer. The buyer was a customer and not entitled to client representation. To be a customer means
that the licensee does not owe any fiduciary duties to the buyer.
During the mid-1980s, buyer's representation became the ac

cepted practice for most multiple listing services. Buyer rep
resentation means that the licensee working with the buyer
is required to give client representation to the buyer. The
licensee owes all of the fiduciary duties to the buyer and not
to the seller.
Dual agency arises when the same licensee represents both

the buyer and the seller, or represents two buyers offering on
the same property. In some states, a dual agency also arises
when two agents from the same company represent clients
with opposing interests. And in a few states, dual agency is
prohibited.
When there is a permitted dual agency, it must be disclosed and consented to by all parties. To not disclose
the dual agency is unethical and illegal.
Failure to disclose dual agency is unethical and illegal.
Failure to Disclose Dual Agency 26

Failure to Submit Offers in Timely Manner

References:
REALTORS® shall submit offers and counter-offers objectively and as quickly as possible. (Adopted 1/93,
Amended 1/95)
A licensee must present all written offers to the owner of a property prior to the closing of a sale on the
property. Two possible exceptions to this rule exist:
1. If the seller has an accepted offer on the property and specifically tells their agent that they do not
want to see any future offers.
2. If the written offer is clearly frivolous, it does not have to be presented.
The frivolous offer situation presents some difficulty for licensees. For example, if a property is listed at
$350,000 and the seller has not indicated any minimum acceptable price. What happens when the licensee
receives an offer for $150,000? Does the offer have to be presented? The answer is yes. Even though the
price may seem extremely low and perhaps even frivolous, the licensee must present the offer. On the other
hand, an offer of $1.00 may fall within the "clearly frivolous" standard.
The best advice that can be given is to present all offers and let the seller decide which offer
they'll consider.
As a general rule, a licensee must present all written offers to the owner of a property prior to the
closing of a sale on the property.
Presentation of Competing Offers

Licensees may not present competing offers in a specific order or in such a manner as to induce a seller to
accept one offer to the detriment of the other offers. When practicing real estate, a licensee is often faced
with how to handle multiple offers for the same property.
A common example would be a listing licensee acting as a dual agent and writing an offer for a buyer on the
property they have listed. The licensee makes an appointment with the seller to present the offer, and then
receives a voicemail that another licensee has a written offer to submit it to the seller. The licensee knows
that if the second offer is accepted, they will only receive the listing side of the commission and not both
sides. If the seller accepts the dual agent licensee's buyer offer, the plan is to call the competing licensee and
suggest their offer be presented as a backup offer because there is already an accepted offer on the property.
27 Failure to Submit Offers in Timely Manner

This is an ethical violation as well as a violation of the fiduciary duty of loyalty, whereby the listing licensee
put their interest ahead of their seller's interest.
When presenting multiple offers in a specific order, the actual date and time of the offer prepara
tion should be used rather than the offer prices.
Presenting competing offers in an order designed to induce the seller to accept one offer over the
other is unethical. Depending on state law, it may also be grounds for disciplinary action against
an agent's license.
Failure to Submit Additional Offers after Seller has

Accepted Offer
References:
When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and
counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in
writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the
listing broker shall provide, as soon as practical, a written affirmation to the cooperating broker stating
that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord
has waived the obligation to have the offer presented. REALTORS® shall not be obligated to continue to
market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend
that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except
where the acceptance is contingent on the termination of the pre-existing purchase contract or lease.
(Amended 1/20)
Once an offer has been accepted by a seller, any additional offers that are subsequent to the accepted offer
must be presented to the seller. Sometimes a seller will instruct the agent in writing not to present additional
offers after there has been an accepted offer on a property. However, even in these situations, licensees are
well advised to inform the seller that an offer has been made.
Failure to submit all offers to the seller is considered to be a violation of the fiduciary duties of care and
disclosure.
Presentation of Competing Offers 28

Disclosure of Existence of Other Offers

References:
Standard of Practice 1-15 and 3-6
REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval,
disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also
disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm,
or by a cooperating broker. (Adopted 1/03, Amended 1/09)
A licensee is required to disclose the existence of offers on a property in response to inquiries from a buyer
or a cooperating licensee (with the seller's approval). Where such disclosure is authorized, the licensee must
also disclose whether the offers were obtained by the listing licensee, another licensee in the listing firm, or
by a cooperating licensee.
This disclosure is required because if an offer is obtained by the listing licensee or by a licensee of the listing
firm, there is the possibility that these offers will be prioritized; the listing agent will encourage the seller to
accept these offers over others. While this practice is not permitted, disclosure puts the parties on notice
that a preferential relationship may exist. This rule requires that buyers and cooperating licensees be made
aware of who obtained the offer in order that they can evaluate any potential preferential treatment that
might be involved when submitting an offer on behalf of their client for the same property.
REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies,
to any broker seeking cooperation. (Adopted 5/86, Amended 1/04)
Standard of Practice 3-6 also requires that, upon inquiry, a licensee must disclose whether accepted offers have
unresolved contingencies. Listing agents often disclose to a cooperating licensee that there is an accepted
offer on a property but not disclose that there are unresolved contingencies. This lack of disclosure will
prejudice the seller if the unresolved contingencies are never resolved. Disclosure of unresolved contingencies
is in the best interest of the seller as it encourages back-up offers in the event the primary offer falls apart.
A licensee is required to disclose the existence of offers on a property and any unresolved contin
gencies in response to inquiries from a potential buyer or cooperating licensee.
29 Disclosure of Existence of Other Offers

Obligations of Buyer's Broker after Buyer's Offer Has

Been Accepted
References:
REALTORS®, acting as agents or brokers of buyers/tenants, shall submit to buyers/tenants all offers
and counter-offers until acceptance but have no obligation to continue to show properties to their clients
after an offer has been accepted unless otherwise agreed in writing. Upon the written request of the
listing broker who submits a counter-offer to the buyer's tenant's broker, the buyer's/tenant's broker shall
provide, as soon as practical, a written affirmation to the listing broker stating that the counter-offer has
been submitted to the buyers/tenants, or a written notification that the buyers/tenants have waived the
obligation to have the counter-offer presented. REALTORS®, acting as agents or brokers of buyers/tenants,
shall recommend that buyers/tenants obtain the advice of legal counsel if there is a question as to whether
a pre-existing contract has been terminated. (Adopted 1/93, Amended 1/22)
A buyer's agent has no duty to continue showing a buyer available properties after the buyer has an accepted
offer on a specific property unless the buyer has given the agent the instruction in writing to continue to
show properties.
Once a buyer has entered into an accepted real estate sale agreement with a seller, the buyer has a duty to
proceed with good faith and use their best efforts to close the transaction. A buyer's agent has the duty of
fair and honest dealing with the seller and cannot become a party to deceiving the seller if their buyer has
no intention to close a transaction.
Preserving Confidential Information

References:
The obligation of REALTORS® to preserve confidential information (as defined by state law) provided by
their clients in the course of any agency relationship or non-agency relationship recognized by law continues
after termination of agency relationships or any non-agency relationships recognized by law...
As a part of the agency relationship, every licensee has an obligation to respect the confidential information
entrusted to them during the course of the agency relationship. The obligation of confidentiality arises out
of the agent's fiduciary duties of care and loyalty.
Obligations of Buyer's Broker after Buyer's Offer Has Been Accepted 30

The agent's preservation of confidential information presents

some interesting dilemmas; what types of information given
in confidence must be disclosed and what types of informa
tion cannot be disclosed?
Material facts or information about a property must be dis

closed. If the seller knows the roof leaks, informs the agent of
this fact, and asks the agent to keep the information confiden
tial, then the agent must remind the seller that information
about the roof's integrity is material and must be disclosed
to all prospective buyers.
However, information that is not material cannot be revealed

to prospective buyers or their agents. Some examples of confidential information that cannot be revealed
are:
• Seller's reasons for selling the property
• Seller's minimum acceptable sales price
• Seller's current financial condition
• Whether the seller is about to face foreclosure of the property offered for sale
All of the above examples are not considered to be material facts requiring disclosure. They are not of such
a nature that their disclosure or lack of disclosure affect the desirability or value of the property itself.
The REALTOR® Standards of Practice and state law require the obligation to preserve confiden
tial information obtained during an agency relationship even after termination of the agency rela
tionship.
Disclosures to be Made at Time of Listing with Respect

to Agency Relationships
References:
REALTOR® Code of Ethics - Standard of Practice 1-12
The licensee must deliver to the seller a disclosure form entitled Disclosure Regarding Real
Estate Agency Relationship prior to the time the listing is signed. The purpose of this form is
informational. The licensee must also orally disclose to the seller whether they are acting exclusively as
agent of the seller or representing both the seller and the buyer as a dual agent. The type of agency
relationship then must be confirmed in writing in the contract for purchase and sale of real property or in a
separate document executed or acknowledged by the seller.
31 Preserving Confidential Information

Because compliance with the disclosure provisions is mandatory, it is important for all licensees in California
to understand the details of the California Agency Disclosure Law.
Compliance with the California Agency Disclosure law is mandatory.
Disclosures when Entering into Buyer Broker Agreements

References:
REALTOR® Code of Ethics - Standard of Practice 1-13
California Civil Code Section 2079.14 - 2079.17
Business and Professional Code 10176 (d)
This statute requires, among other things, that the licensee deliver to the buyer, prior to the
execution of any offer to purchase, a disclosure form entitled Disclosure Regarding Real Estate
Agency Relationship." Again, the purpose of this form is informational. This is to alert the buyer as to
whom the agent is intending to represent. The type of agency relationship then must be confirmed in writing
in the contract for purchase and sale of real property or in a separate document executed or acknowledged
by the buyer.
Nondisclosure of Material Facts

References:
Article 2
A major ethical obligation of the licensee is to make full disclosure of any material facts regarding a
property. This is particularly the case with facts that might have an adverse impact on the buyer's desire
to purchase the property. It is clear in California under Civil Code Sections 2079 to 2079.6, that the licensee
is required to reveal not only known facts but also those facts which the licensee should have known. Issues
that fall under this rule may include, but is not limited to the following:
• Condition of property issues
• Local real estate market conditions and/or problems
• Issues relating to stigmatized property. (Classic example is duty to disclose if a death occurred on the
property within three years prior to the sale date)
• Condition of title issues
Disclosures when Entering into Buyer Broker Agreements 32

An agent must obey the instructions of their principal. However, the laws on disclosure override the orders
of an agent's principal if the agent will be violating their disclosure obligations. For example, if a seller
instructs an agent not to disclose to a prospective buyer that the roof leaks, compliance with such an
instruction would violate the agent's legal duty to disclose a material fact. In this situation, the agent
cannot obey their principal because, in doing so, they would violate the law.
Failure to Explain Offer Contingencies

Licensees are required to explain offer contingencies to clients. A licensee must explain to their client the
meaning and probable significance or implications of contingencies that can affect the closing date or other
terms of the real estate sale agreement. It is not uncommon for a licensee to neglect to explain a contingency
or to minimize the impact of a contingency. Failure to do so is a detriment to the client.
Examples of the failure to explain a contingency are numerous. The following are some common examples:
• Subject to closing of buyer's property. The licensee should explain the risks involved in this contingency.
Is buyer's transaction a relatively solid deal, or is it subject to an array of contingencies that could lead
to a sale-fail?
• Subject to sale of buyer's property. This contingency, if accepted by a seller, can literally tie up the
seller's property for a lengthy period while the buyer waits to obtain a satisfactory offer. For most sellers
this would not be an acceptable result.
• Subject to buyer obtaining financing. Although this contingency on its face seems an easy one to remove,
licensees should advise the seller as to the buyer's financial strength. Presenting a loan prequalification
letter from a lender, or demanding that one be presented to the seller, is the strongest assurance to the
seller that the buyer can qualify for a loan and close the transaction.
Agreements Generated by Electronic Transmission

References:
REALTOR® Code of Ethics: Standard of Practice 9-2
Today, many contractual agreements are created through the use of electronic transmissions (email, Internet,
fax, etc.). These agreements include listing agreements, purchase and sale agreements, leases, buyer repre
sentation agreements, and other contracts. Due to the fact that in most electronic contractual situations
personal contact between the parties is limited, the terms of the contracts are often not explained in the
same way as they would be in a face-to-face situation. As a result, this standard was adopted in 2007 to
address the realities of modern real estate practice in which many agreements are created electronically.
The point of the rule is simple: a licensee has an obligation to explain and disclose the specific terms of the
contract prior to its execution just as would be done in a face-to-face situation.
33 Failure to Explain Offer Contingencies

Conflicts of Interest
References:
Real Estate Settlement Procedures Act (RESPA)
A licensee should avoid situation which may give rise to a conflict

of interest. The avoidance of conflict of interests arises out of the licensee's
agency relationship with the principal. The agency relationship is based upon
fiduciary duties, which require working in the best interest of the principal.
Obviously, if the actions of a licensee would personally benefit the licensee and
not the principal, the best interests of the principal are not being fulfilled.
The fact situations which can give rise to conflicts of interest between the
licensee and the principal are numerous. The following are some common
examples:
• A licensee makes an offer to purchase a property that is suitable for their

buyer-client, but does not present the property to their client before mak
ing an offer.
• A licensee purchases a listed property for immediate resale at a higher price than for which it was
purchased.
• A licensee shows only those properties to their buyers that have a cooperating fee split that is acceptable
to the licensee.
• A licensee fails to disclose to a buyer (in a transaction in which the licensee is an agent for that buyer) the
nature and extent of the licensee's direct or indirect ownership interest in the property. Indirect interests
in a property may include relationships to the seller by blood or marriage or any other relationship
with another person with whom the licensee has a special relationship (such as interest in a corporation,
partnership, trust, etc.)
• In cases where the licensee has a listing, the licensee must disclose to the seller that the prospective
purchaser is related to the licensee by blood or marriage or that the property is being purchased by an
entity in which the licensee has an ownership interest by any other person with whom the license occupies
a special relationship where there is a reasonable probability that the licensee could be indirectly acquiring
an interest in the property.
NOTE: California law requires the licensee to disclosure their license status when selling their own
property, unless they have listed the property with another licensee. However, the REALTOR®
Code of Ethics, Article 4, does consider this fact situation a conflict of interest that must be dis
closed in writing.
Referral fees or kickbacks from lenders, escrow companies, insurance companies, pest control companies, home
inspection companies, etc., may give the appearance of a conflict of interest. The Real Estate Settlement
Conflicts of Interest 34
Procedures Act prohibits the payment of referral fees or finder's fees by federally-related lenders. California
real estate law prohibits receiving a referral fee from an escrow, title, or termite company.
There are numerous fact situations not discussed above which might place a licensee in a misrepresentation
or conflict of interest situation. Each licensee should be extremely vigilant at all times to avoid any situation
where the licensee may either willfully or negligently place themselves in a position where misrepresentation
is a potential problem.
The best advice an agent can follow is to fully understand the fiduciary duties of obedience, loy
alty, care, accounting and disclosure. Each of these duties imposes the highest standard of conduct
upon the licensee. Both the NAR Code of Ethics and California Real Estate law impose standards
upon the licensee that are designed to ensure that the licensee fulfills all of the fiduciary duties to
the fullest extent possible.
35 Conflicts of Interest
Segment 4: A Licensee's
Duty to the Public
In your prior reading assignment, attention was on the specific prohibited conduct with respect to clients and
customers. It was noted that the basis of ethical conduct between a licensee and a principal is based upon
the fiduciary duties inherent in the agency relationship. The REALTOR® Code of Ethics and Standards
of Practice, together with state law and regulations are, to a large degree, addressing issues based on an
agency relationship. Accordingly, all of the issues discussed in your prior reading assignment were specific
the licensee and client relationship.
Now we are going to turn our attention to the duties a licensee owes to the public. These duties apply even
though there is no agency or customer relationship between the licensee and a specific member of the public
or the public in general.
After you complete the next reading assignment you will be able to discuss and explain the numerous duties
a licensee owes the public.
No Discrimination
References:
REALTOR® Code of Ethics - Article 10
REALTOR® Standard of Practice 10 - (1) (2)
Federal Fair Housing Laws
No licensee shall deny equal professional services or shall discriminate against a person on the basis of race,
color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity.
The REALTOR® Code of Ethics and Standards of Practice applying to nondiscrimination broadly prohibit
any discrimination in service or in making available housing opportunities for seven protected classes. Federal
fair housing laws specifically cover these protected classes. These same protected classes are also covered
under the California Fair Housing Laws. Sexual orientation and gender identity has been a protected class
under California law for a number of years.
An agent must obey the instructions of their principal. However, all of the federal and state anti-discrimina
tion laws limit the obligation of the agent to obey their principal, if in doing so, the agent will be violating
the federal or state fair housing laws.
Segment 4: A Licensee's Duty to the Public
For example, if a seller instructs an agent not to show the property to a minority prospect, com
pliance with such an instruction would violate both federal and California fair housing laws. The
agent in this situation cannot obey the principal because in so doing, they would violate the law.
The Standard of Practice located under Article 10 specifically addressed the following discrimination issues:
• When involved in the sale or lease of a residential property, a licensee may NOT volunteer infor
mation regarding the racial, religious, or ethnic composition of any neighborhood. However,
this does not prevent a licensee from providing a client with other demographic information relating to
a neighborhood. The types of demographic information that can be volunteered relate to such factors as
age distribution, income distribution, school profiles, and so forth.
• When NOT involved in a property sale or lease, a licensee can provide sensitive demographic information,
but only if the licensee deems such demographic information is necessary to assist with the completion
of a transaction. The licensee can provide this information only if its presentation is consistent with a
non-discriminatory presentation of the data and the information is obtained or derived from a recognized,
reliable, independent, and impartial source. The licensee cannot alter, modify, add to, or delete from the
independent information so as to color or change the interpretation of such demographic data.
• A licensee cannot engage in any activity that would result in panic selling.
• A licensee cannot print, display, or circulate any statement or advertisement involving the selling or
renting of a property that indicates any discrimination, limitation, or preference based on race, color,
religion, sex, disability, familial status, national origin, sexual orientation, or gender identity.
• Licensees cannot use hate speech, slurs, epithets, or harassing speech that are based on race, color,
religion, sex, disability, familial status, national origin, sexual orientation, or gender identity.
A licensee shall not deny equal professional services or discriminate against a person on the basis
of race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender
identity.
Providing Competent Services

References:
Article 11
The services which REALTORS® provide to their clients and customers shall conform to the standards of
practice and competence which are reasonably expected in the specific real estate disciplines in which they
engage; specifically, residential real estate brokerage, real property management, commercial and industrial
37 No Discrimination
real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication,
real estate auction, and international real estate.
REALTORS® shall not undertake to provide specialized professional services concerning a type of property
or service that is outside their field of competence unless they engage the assistance of one who is competent
on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged
to provide such assistance shall be so identified to the client and their contribution to the assignment should
be set forth. (Amended 1/10)
The practice of real estate involves numerous disciplines that are related, yet independent of each other. Just
as in the medical profession, a skin specialist should not claim to be a competent brain surgeon. Likewise,
a licensee competent in one area of real estate should not claim to be competent in all areas of real estate
practice.
For example, separate areas of real estate practice include:
• Residential brokerage
• Commercial and industrial brokerage
• Real property management
• Real estate appraisal
• Real estate counseling
• Real estate syndication
• Real estate auction
• International real estate
If any real estate licensee desires to undertake an engagement in areas

outside of their expertise, the licensee should engage the services of one
who is competent in that discipline. Their identity and contribution to
the work is to be disclosed to the principal.
For example, if a licensee who only deals in residential real estate has a client who wants to list
their 100-unit apartment complex for sale, the licensee should engage the services of a licensee who
specializes in commercial real estate. The commercial licensee, along with the residential licensee
and the seller, should enter an agreement as to how the property can be marketed in the best in
terest of the seller.
Providing Competent Services 38

Ethical Advertising
References:
Article 12
REALTORS® shall be honest and truthful in their real estate communications and shall present a true
picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their
status as real estate professionals is readily apparent in their advertising, marketing, and other represen
tations, and that the recipients of all real estate communications are, or have been, notified that those
communications are from a real estate professional. (Amended 1/08)
Advertising is an important component of marketing real property. It

provides benefits to both sellers and buyers. For sellers, it exposes their
property to the general marketplace. For buyers, it identifies properties
that may be of interest. However, advertising is an area of the real estate
practice that is often abused by misleading ad content. Advertising con
tent does not have to be actual misrepresentation to be deemed unethical.
Any advertising that misleads is unethical.
In addition, with all communications to the public, licensees are required

to identify their status as a real estate licensee. This standard applies
whether the communication is in the form of advertising, marketing ma
terial, electronic communications, or any other form of communication to
the public.
The basic standard required of advertising is that it must present a true

picture and must not be misleading or untruthful in any way. The follow
ing are a few examples of practices that are considered unethical:
• Any ad which relies upon a bait-and-switch scheme. Ads in this cate

gory include advertising property that has already been sold, property
that is not for sale, or advertising something that sounds too good to be true.
• Use of misleading words, maps, or images that imply that the property is something other than it actually
is. For example, showing a property located on a map near the ocean when, in fact, the property is located
a number of blocks from the ocean.
• Blind ads where the ad appears to be that of a property owner when, in fact, the ad is that of a licensee.
• Making any statement in an ad that is clarified only in small print or with asterisks. For example, an ad
states "5.5% interest" but the small print states that this offer only applies to buyers with a credit score
over 730.
• Only licensees who participated in a transaction as the listing or cooperating selling agent may claim
to have sold a property. This rule prevents a licensee claiming that they sold a property when in fact
another licensee in their office may have sold the property.
A report from the National Association of REALTORS® addressed the issue of relisting for-sale homes by
temporarily pulling them off the market and then reintroducing them to the market as a "new" listing. The
39 Ethical Advertising
report concluded that while a listing contract is technically "new" each time the property is relisted, to the
consumer a "new" listing is a property that is offered for sale for the first time. As a result, this practice
can result in confusion and misunderstandings. Since the NAR Code of Ethics requires truthful advertising
and that all communications present a true picture in their advertisements, relisting a property as "new"
should be viewed as deceptive. Licensees should refer to relisted properties as "back on market" or "price
reduced." The report also encourages MLS services to implement additional listing input categories such as
"reintroduced" or "recently relisted."
Any advertising that misleads is unethical.
Use of the Internet

References:
Article 12
Current real estate practice is heavily reliant on the internet. As a result, the Code of
Ethics addresses specific issues and challenges raised by the use of the internet as a vital
tool in real estate practice.
• Standard of Practice 12-8: A licensee must use reasonable efforts to ensure that
any information a licensee provides on a website is current, up-to-date, and presents
a true picture of the licensee's services. Often the information presented on websites
becomes stale or outdated. This standard requires licensees to make reasonable
efforts to correct updated or inaccurate information.
• Standard of Practice 12-9: Any website of a REALTOR® firm must disclose the firm's name and
states in which the firm is licensed in a readily apparent manner. This standard was added to address
the realities of modern real estate practice that involve the use of the Internet by multi-state operations.
This standard ensures that individuals searching the Internet are informed that the website they have
entered is the site of a REALTOR® firm.
• Standard of Practice 12-11: Licensees are prohibited from selling or sharing consumer information
gathered over the Internet without first disclosing the possibility that such information may be sold or
shared. Any disclosures relating to possible shared or sold information must be readily apparent.
• Standard of Practice 12-13: A licensee may not use or display professional designations, certifications,
or other credentials to which they are not entitled.
Under Standard of Practice 12-10, the requirement that licensees present a true picture in their adver
tising also applies to the URLs and domain names that a licensee uses.
• A licensee is prohibited from engaging in deceptive or unauthorized framing of real estate brokerage
websites. Framing means extracting the contents of someone else's web site and placing that information
Ethical Advertising 40
within an html-coded frame on the licensee's web site. The result makes it appear that the information
originates on the licensee's web site.
Brian is an agent for Happy Realty and has promotional materials posted on his web site. Sam
takes the website address for Brian's promotional materials and directs an HTML frame on his site
to give the appearance that Brian's promotional materials appears on Sam's website, as though
Brian's materials belong to Sam.
• A licensee is prohibited from manipulating or presenting the listing content of another licensee in such a
way that it produces a deceptive or misleading result.
• A licensee is prohibited from deceptive use of meta tags, keywords, or other devices or methods to direct,
drive, or divert Internet traffic or to otherwise mislead consumers. Generally, this prohibited activity
relates to spamming (i.e., flooding) key words that will result in directing traffic to a site.
Some website owners strategically place keywords in the text of their pages which are not related
to the content of the website. These keywords are designed to attract search engine users who may
be looking for the keywords but not for the content of the site. Keywords may be disguised or hid
den by creative color schemes or technical savvy in an attempt to have search engines rank the
website higher. This is not only unethical, but many search engines can identify attempts to cheat
their system and may actually demote the website's ranking.
• A licensee cannot use materials developed by others without proper attribution or without permission
from the content creator.
• A licensee is prohibited from using images on their website to intentionally mislead consumers and clients.
Under Standard of Practice 12-12, a licensee is prohibited from using or registering URLs or domain
names that would present less than a true picture of the licensee or their services.
Any advertising that misleads is unethical. This principle includes the use of the internet as a
form of advertising or communication.
41 Use of the Internet

Offering Prizes, Inducements, and Free Services

References:
Standard of Practice 12-1 and 12-3
REALTORS® must not represent that their brokerage services to a client or customer are free or available
at no cost to their clients, unless the REALTOR® will receive no financial compensation from any source
for those services. (Amended 1/22)
The REALTOR® Code of Ethics states that a licensee must not represent that their brokerage services
to a client or customer are free or available at no cost to their clients. The only exception is when the
REALTOR® will receive no financial compensation from any source for those service.
A licensee, desiring to represent buyers exclusively, advertises in a real estate publication: "Why
not use a buyer's agent? As a buyer, it costs you nothing." Obviously, the licensee does not intend
to work for free. Rather, the seller will be paying the fee. The licensee must disclose to any future
buyer clients how the fee arrangement works.
The offering of premiums, prizes, merchandise discounts or other inducements to list, sell, purchase, or
lease is not, in itself, unethical even if receipt of the benefit is contingent on listing, selling, purchasing, or
leasing through the REALTOR® making the offer. However, REALTORS® must exercise care and candor
in any such advertising or other public or private representations so that any party interested in receiving
or otherwise benefiting from the REALTOR®'s offer will have clear, thorough, advance understanding of
all the terms and conditions of the offer. The offering of any inducements to do business is subject to the
limitations and restrictions of state law and the ethical obligations established by any applicable Standard
of Practice. (Amended 1/95)
The REALTOR® Code of Ethics also permits offering premiums, prizes, merchandise discounts, or offering
inducements to list, sell, purchase, or lease real property. This is the case even if the receipt of the benefit
is contingent upon the listing, selling, purchasing, or leasing of the real property through the REALTOR®
making the offer.
The Code of Ethics does not consider these activities unethical. They are viewed as normal sales and
marketing tools common in most areas of American commerce. Caution should be taken, however, to be
accurate and thoroughly explain the terms of the offer to the public.
Offering prizes or inducements are always subject to the limitations or restriction of state law.
Offering Prizes, Inducements, and Free Services 42

Offering Property For Sale Without Authority

References:
REALTORS® shall not offer for sale/lease or advertise property without authority. When acting as listing
brokers or as subagents, REALTORS® shall not quote a price different from that agreed upon with the
seller/landlord. (Amended 1/93)
A licensee may not advertise or otherwise offer a property for sale or lease without the authority of the
property owner. Also prohibited under this standard is the practice of leaving a "For Sale" sign on a
property after a listing has expired or been withdrawn. In addition, the licensee cannot quote a price for a
property different than the listed price.
The seller lists the property under a net listing for $400,000. The licensee may not advertise the
property for sale for $450,000. Advertising over the listed price, even if it is a net listing, is not
permitted. The licensee should explain to any potential buyer that the price is a net price and
that the licensee's fee must be added to the listed price of the property.
No licensee may offer for sale or lease or advertise a property without the authority of the prop
erty owner.
Name of Firm Must be Disclosed in Advertising

References:
REALTORS® shall not advertise nor permit any person employed by or affiliated with them to advertise real
estate services or listed property in any medium (e.g., electronically, print, radio, television, etc.) without
disclosing the name of that REALTOR®'s firm in a reasonable and readily apparent manner either in the
advertisement or in electronic advertising via a link to a display with all required disclosures. (Adopted
11/86, Amended 1/16)
All property advertised for sale must disclose the name of the listing firm. This means that an agent cannot
advertise a property and simply put their name on the advertising. The name of the firm with which they
are affiliated must be stated and be readily apparent in all advertising relating to a listed property, whether
the advertising is in the form of print, radio, television, or electronic medium.
43 Offering Property For Sale Without Authority

A licensee cannot advertise a listing "for sale" on an online buy/sell website without disclosure of
the name of the licensee's firm with which they are licensed.
State law will also dictate what information about a licensee's status as a real estate agent must be included
on the advertisement.
Disclosure of License Status

References:
REALTORS®, when advertising unlisted real property for sale/lease in which they have an ownership
interest, shall disclose their status as both owners/landlords and as REALTORS® or real estate licensees.
(Amended 1/93)
A licensee offering property for sale or lease that is not listed, but in which they have an ownership interest,
must disclose their status as a licensee to the public. Such disclosure is to ensure that the public is made
aware that the property owner has experience in real estate matters beyond that of a normal person.
A licensee owns rental property or is a partner in rental property. The property is offered "for
sale" in the newspaper. This Standard of Practice requires that the licensee disclose their licensee
status in all advertising, even if it is not a listed property.
Unauthorized Practice of Law

References:
Article 13
REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall
recommend that legal counsel be obtained when the interest of any party to the transaction requires it.
Disclosure of License Status 44

The line between activities within the scope of a licensee's permitted conduct and that
which extends into the area of the practice of law is often difficult to determine. The
legal profession would like to draw the line in their favor, making any advice an agent
gives to a client that has legal implications be considered the unauthorized practice
of law. The real estate profession prefers to give a great deal of latitude to agents in
advising their clients.
There are, of course, many gray areas where the conduct of a licensee may be near or
at the line of practicing law. A common example is the drafting of non-standard or common conditions or
contingencies. Some examples of conduct that should be viewed as the practice of law include:
• Advising a seller on how to complete a seller's property disclosure statement where issues of disclosure
or non-disclosure have legal liability or implications.
• Advising clients on real estate related tax issues connected to the purchase or sale of property or the
ownership of property.
• Advising clients on the terms and conditions of loan documents and their legal implications.
• Advising clients on how to take title to property.
• Advising clients on foreclosure issues and procedures.
• Giving a legal opinion on the validity and technical points of an IRC 1031 Tax Deferred Exchange.
Technically, real estate licensees are practicing law when preparing contracts such as purchase and sale
agreements and addenda. However, the real estate profession and the legal profession understand that it is
necessary for real estate licensees to prepare certain legal documents in order that a transaction can proceed.
As a result, real estate licensees are permitted to fill in the blanks in pre-printed, standardized forms with
respect to transactions handled in the usual course of business. Accordingly, a real estate licensee may fill in
the blanks of a purchase and sale agreement, a promissory note for earnest money, rental agreements, and
most lease agreements. The licensee, however, is to fill in the blanks at the direction of a party to the
transaction, such as the seller, buyer, landlord, or tenant.
The types of documents that may be completed by a licensee are those that are incidental to the
practice of real estate. However, a licensee should not draft or assist in the preparation of a land
sale contract, option contract, deed, mortgage, or complicated lease. All of these documents re
quire the services of an attorney.
45 Unauthorized Practice of Law

Cooperation in Realtor® Professional Standards Hearings

References:
REALTOR® Code of Ethics - Article 14
As a member of a REALTOR® organization (either national, state, or local) a REALTOR® is obligated

to cooperate in any ethical or standards of practice proceeding or investigation if charged with unethical
conduct. This obligation extends to providing evidence or cooperating in any way so that the alleged
violation will be resolved. In addition, the Board's investigative process or proceedings cannot be obstructed
by instituting or threatening to institute actions for libel, slander, or defamation against any party to a
professional standards proceeding.
Cooperation in Realtor® Professional Standards Hearings 46

Segment 5: Duties to REALTORS®
This segment is all about your ethical obligation and conduct with respect to other REALTORS®. Most of
the considerations in this next reading assignment are not matters imposed or required by law; rather they
are standards of practice that the industry has established to define proper conduct among and between its
members and to self-police the industry.
Of course, not all real estate licensees are REALTORS®. Only those belonging to the trade association
known as the National Association of REALTORS® can use the term "REALTOR®."
Now, we all know that the real estate industry is highly competitive. But just stop and think a minute
about where you would be without the cooperation of your fellow licensees. For example, who would sell
your listing if you didn't have a buyer for it, and what would you sell your buyer if you don't have a listing?
Likewise, when two agents are in competition for the same listing, only one of them will be awarded the
contract, but the other agent who competed for it might just have the perfect buyer! All of these types of
situations create an atmosphere of competition and cooperation.
That's our focus here in this section - to define your duties to your fellow REALTORS®. Okay, let's get on
with it! These are our learning objectives for this segment:
After reading this segment, you will understand how the Standards of Conduct promoted by the REAL
TOR® Code of Ethics are positive guidelines in trying to balance the competition and cooperation among
REALTORS®, and you be able to discuss and explain the duties you owe your fellow REALTORS®.
Making False or Misleading Statements About

Competitors
References:
Realtor® Code of Ethics Article 15
Realtor® Code of Ethics Standard of Practice 15-2
Due to the highly competitive nature of the real estate business, a standard of practice was added prohibiting
licensees from making or repeating false or misleading statements about their competitors in order to obtain
an advantage. Standard of Practice 15-2 states:
The obligation to refrain from making false or misleading statements about other real estate professionals,
their businesses, and their business practices includes the duty to not knowingly or recklessly publish, repeat,
retransmit, or republish false or misleading statements made by others. This duty applies whether false or
misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or
by any other means. (Adopted 1/07, Amended 1/12)
A licensee should never make or repeat false or misleading statements about any competitors'
business or business practices.
Interfering with Agency Relationships

References:
REALTOR® Code of Ethics, Article 16-1 through 16-20
Article 16 of the REALTOR® Code of Ethics and Standards of Practice attempts to define permissible
conduct of REALTORS® with respect to protecting the agency relationship that may exist between a
licensee and a client. This article is based upon the premise that the agency relationship established between
a licensee and the client must be respected. Cooperation between agents representing opposing clients is
obviously encouraged, but any action which would interfere with an existing agency relationship must be
avoided. The Standards of Practice under Article 16 identify specific situations where agency interference
issues can arise. It should be noted that nothing in any of the standards of practice prohibits aggressive or
innovative marketing or business practices that would otherwise be ethical. In other words, a REALTOR®
cannot use Article 16 as a basis to allege that another REALTOR® is interfering in an agency relationship
because of aggressive business practices.
Some points to keep in mind:
• General announcements are permitted even if the marketing piece is communicated to a party already in
an agency relationship with a licensee. The most common examples are mass mailings, general telephone
canvassing, or other communications that are addressed to the public in general.
An amendment to Standard of Practice 16-2 clarified what the term "general" announcements meant. It
defined a general announcement as a general telephone canvass, general mailing, or distribution addressed
to all prospects in a given geographical area or in a given profession, business, club, organization, or other
classification or group. Obviously, the burden on a licensee to verify that each person in the target group
was not currently represented in an agency relationship prior to sending out the mass communication
would be impossible.
Broker John has Seller Smith's property listed. Broker Mary sends a mass mailer to all the home
owners on Seller Smith's street. In the mass mailer, Broker Mary promotes a "fee for services" pro
gram that would greatly reduce the cost to market Seller Smith's property. Broker John cannot
use Article 16 as a way to protect his agency relationship with Seller Smith if Seller Smith elects
to cancel his listing and re-list with the less costly marketing program of Broker Mary.
Making False or Misleading Statements About Competitors 48

• The intent of Article 16 is to prevent targeted written or verbal communications where the target(s) of
the mailing or communication are those which are exclusively known by the licensee to be in an agency
relationship with another licensee. These targeted solicitations or communications are generally of two
basic types:
• The first relates to telephone or personal solicitations of property owners who have been identified by
a real estate sign, an entry in a multiple listing database, or other evidence that a property has been
exclusively listed with another REALTOR®.
• The second relates to written solicitations for listings when a property is listed with another REAL
TOR® if the solicitations are not part of a general mailing. These solicitations cannot be directed
specifically at property owners identified through compilations of current listings, "for sale" signs, or
other sources of information made available to REALTOR® through MLS service rules under offers
of cooperation.
A licensee cannot use the multiple listing service information of those sellers listed in a certain ge
ographic area as the specific target of a solicitation or communication.
• A REALTOR® can contact the client of another licensee for the purpose of offering to provide real estate
services unrelated to the type of service currently being provided. An example would be to offer brokerage
services to a client of a licensee who currently represents the client in a property management capacity.
However, if the information about the client is obtained from a multiple listing service, the information
may not be used to solicit the client regardless of whether the type of service being offered is different
from the type of service being provided.
• The general rule is that an agent may not solicit a listing that is currently listed exclusively with another
agent. However, if the listing agent refuses to provide the expiration date of the listing when asked by
a competing licensee, the licensee can contact the listing agent's client for the purpose of securing the
listing expiration date. They can also discuss the terms under which a future listing might be taken or
can even take a listing effective upon the expiration of the exclusive listing of the current listing agent.
This same principle applies to buyers or tenants that are currently under contract with a licensee. If
the licensee refuses to give the competing licensee information relating to the termination date of the
current buyer or tenant contract, then the competing licensee can contact the buyer or tenant to obtain
the contract termination date and enter into a buyer or tenant contract to become effective upon the
expiration of the current buyer or tenant contract.
If the client of a REALTOR® contacts a competing REALTOR® during the term of an existing exclusive
agency relationship to discuss the same type of service currently being provided by a REALTOR®, the
competing REALTOR® may discuss the terms under which they would enter into a future agreement
or can enter into an agreement which becomes effective upon the expiration of the existing exclusive
agreement. The competing REALTOR® can take these actions only if that REALTOR® did not directly
or indirectly initiate the discussions.
• Clients who have worked with a REALTOR® on prior engagements can be contacted by a competing
REALTOR® for future business.
• Prior to entering into an agency relationship with a client, a REALTOR® must take affirmative steps
to be assured that the client is not currently subject to a valid exclusive agreement to provide the same
49 Interfering with Agency Relationships

type of real estate services with another agent. This rule is often ignored. For example, a licensee holds
an open house and an individual visits the open house. The licensee under this rule has an obligation
to inquire if the individual is engaged in an agency relationship with another licensee prior to drawing
the individual into a conversation relating to the property or other properties that might fit the desired
parameters of that individual. The licensee can demonstrate and describe the features and amenities of
the specific property, but they cannot attempt to convert the walk-in prospect into a client without first
determining the prospect's current agency relationships, if any.
• A buyer's agent must disclose their relationship to a seller at the first contact and, in addition, must
provide written confirmation of the buyer's agency relationship no later than the execution of the purchase
and sale agreement. Similarly, on unlisted properties, an agent must disclose their status as a buyer's
agent to the seller at first contact and again disclose that relationship in writing no later than the
execution of any purchase and sale agreement. If the buyer's agent desires to be compensated by the
seller for any potential sale, the agent must make the request for such compensation at the first contact.
• An agent acting as agent of a seller must disclose that relationship to the buyer as soon as practical and
provide written confirmation of such disclosure to the buyer no later than the execution of any purchase
agreement.
• Once a client, whether a seller or a buyer, is in an agency relationship with a licensee, all dealings with
that individual must be conducted through their agent. There are two exceptions to this rule:
• The client's agent consents to direct contact with the client.
• The client initiates direct dealings.
• In cooperative transactions, REALTORS® shall compensate the cooperating managing broker. No com
pensation shall be offered, either directly or indirectly, to any affiliated licensee of the managing broker
without the prior knowledge and consent of the managing broker.
• A subagent of a seller, who is working with a buyer or a buyer's broker, cannot use the terms of the offer
to purchase to attempt to modify the listing broker's offer of compensation to the subagent or buyer's
broker or make an offer to purchase contingent on the listing broker's agreement to modify the offer of
compensation.
Buyer's agent Brian has an agreement with his buyer requiring a minimum compensation of 2.5%
of the purchase price. Listing agent Lilly has offered to compensate the buyer's agent in the
amount of 2.0%. In order to secure the balance of the fee, Brian has his buyer make his offer sub
ject to Brian receiving a 2.5% fee. This practice is prohibited by the Standards of Practice as it
would in essence be an attempt to force a modification of the listing agent's offer of compensation
to the cooperating agent.
• An agent may not place any sign or notice on a property for sale or lease without the consent of the
seller/landlord.
• An agent contemplating terminating the relationship with their managing broker may not induce clients
to cancel exclusive contractual agreements between the client and the firm and rewrite them after the
move. However, the managing broker can establish agreements with affiliated licensees that address when
Interfering with Agency Relationships 50

the managing broker will consent to a departing affiliated licensee asking a client to follow that licensee
in the event they terminate their relationship with the managing broker and either go out on their own
or join another brokerage.
Drawing the line between ethical competition and cooperation is often difficult. Perhaps if all li
censees kept in mind the old adage "what goes around, comes around", decisions about conduct in
any given competitive situation would be easier to resolve.
A licensee may not interfere with any existing agency relationship established between another
licensee and their client.
Dispute Resolution
References:
REALTOR® Code of Ethics Article 17
Article 17 of the Standards of Practice generally requires that if con

tractual disputes or certain non-contractual disputes arise between RE
ALTORS® associated with different firms, these disputes are to be sub
mitted to arbitration and not be litigated. The obligation to arbitrate
includes the obligation to participate in an arbitration proceeding and
to be bound by the arbitration award. However, if all parties to the
arbitration proceeding elect to litigate the dispute, arbitration is not
required as long as all parties to the dispute notify the appropriate
Board of REALTORS® in writing of this election.
The purpose of Article 17 is to require and encourage arbitration. Ar

bitration is an alternative dispute resolution method that involves less
time and expense to reach a result than traditional litigation.
51 Interfering with Agency Relationships

No Discrimination
References:
REALTOR® Code of Ethics Standard of Practice Article 3-11 and Article 10-5
Just as it is outlined in Article 10 relating to discrimination against clients and the public, the Code of Ethics
also prohibits discriminatory behavior by brokers towards other real estate licensees.
In 2020, NAR added a Standard of Practice to the Code of Ethics stating that REALTORS® must not
use harassing speech, hate speech, epithets, or slurs based on race, color, religion, sex, handicap, familial
status, national origin, sexual orientation, or gender identity. The rule applies even when REALTORS®
make statements on their personal social media accounts, and even if the statements made are not directly
related to real estate transactions.
Realtors® may not refuse to cooperate on the basis of a broker's race, color, religion, sex, handicap, familial
status, national origin, sexual orientation, or gender identity. (Adopted 1/20)
No Discrimination 52
Conclusion
In closing, we ask you to remember that ethical conduct is not only good for your business, it's good for the
entire industry. It also makes us all look better to the public.
Today's real estate industry is driven by fierce competition between agents trying to get their market share.
The industry is also driven by a need for cooperation between agents. This is what we need to keep in
balance: competition and cooperation. And all of us should strive to do this as ethically and professionally
as possible.
Ethical behavior is about doing the right and fair thing at all times. I'm Jeff Sorg for OnlineEd. Thank you
for you time, this time! We hope to see you right back here next time.
Appendix - The National Association
of REALTORS® Code of Ethics
Code of Ethics and Standards of Practice
of the NATIONAL ASSOCIATION OF REALTORS®
Effective January 1, 2023
Where the word REALTORS® is used in this Code and Preamble, it shall be deemed to include REALTOR-
ASSOCIATE®s.
While the Code of Ethics establishes obligations that may be higher than those mandated by law, in any
instance where the Code of Ethics and the law conflict, the obligations of the law must take precedence.
Preamble
Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and
growth of free institutions and of our civilization. REALTORS® should recognize that the interests of
the nation and its citizens require the highest and best use of the land and the widest distribution of land
ownership. They require the creation of adequate housing, the building of functioning cities, the development
of productive industries and farms, and the preservation of a healthful environment.
Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility
and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent
in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of
their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor.
In recognition and appreciation of their obligations to clients, customers, the public, and each other, RE
ALTORS® continuously strive to become and remain informed on issues affecting real estate and, as knowl
edgeable professionals, they willingly share the fruit of their experience and study with others. They identify
and take steps, through enforcement of this Code of Ethics and by assisting appropriate regulatory bodies,
to eliminate practices which may damage the public or which might discredit or bring dishonor to the real
estate profession. REALTORS® having direct personal knowledge of conduct that may violate the Code of
Ethics involving misappropriation of client or customer funds or property, willful discrimination, or fraud
resulting in substantial economic harm, bring such matters to the attention of the appropriate Board or
Association of REALTORS®. (Amended 1/00)
Appendix - The National Association of REALTORS® Code of Ethics
Realizing that cooperation with other real estate professionals promotes the best interests of those who
utilize their services, REALTORS® urge exclusive representation of clients; do not attempt to gain any
unfair advantage over their competitors; and they refrain from making unsolicited comments about other
practitioners. In instances where their opinion is sought, or where REALTORS® believe that comment
is necessary, their opinion is offered in an objective, professional manner, uninfluenced by any personal
motivation or potential advantage or gain.
The term REALTOR® has come to connote competency, fairness, and high integrity resulting from adherence
to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients
ever can justify departure from this ideal.
In the interpretation of this obligation, REALTORS® can take no safer guide than that which has been
handed down through the centuries, embodied in the Golden Rule, "Whatsoever ye would that others should
do to you, do ye even so to them."
Accepting this standard as their own, REALTORS® pledge to observe its spirit in all of their activities
whether conducted personally, through associates or others, or via technological means, and to conduct their
business in accordance with the tenets set forth below. (Amended 1/07)
Duties to Clients and Customers
Article 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge them
selves to protect and promote the interests of their client. This obligation to the client is primary, but it
does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller,
landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties
honestly. (Amended 1/01)
REALTORS®, when acting as principals in a real estate transaction, remain obligated by the duties imposed
by the Code of Ethics. (Amended 1/93)
The duties imposed by the Code of Ethics encompass all real estate-related activities and transactions
whether conducted in person, electronically, or through any other means.
The duties the Code of Ethics imposes are applicable whether REALTORS® are acting as agents or in legally
recognized non-agency capacities except that any duty imposed exclusively on agents by law or regulation
shall not be imposed by this Code of Ethics on REALTORS® acting in non-agency capacities.
As used in this Code of Ethics, "client" means the person(s) or entity(ies) with whom a REALTOR® or a
REALTOR®'s firm has an agency or legally recognized non-agency relationship; "customer" means a party
to a real estate transaction who receives information, services, or benefits but has no contractual relationship
with the REALTOR® or the REALTOR®'s firm; "prospect" means a purchaser, seller, tenant, or landlord
55 Preamble
who is not subject to a representation relationship with the REALTOR® or REALTOR®'s firm; "agent"
means a real estate licensee (including brokers and sales associates) acting in an agency relationship as
defined by state law or regulation; and "broker" means a real estate licensee (including brokers and sales
associates) acting as an agent or in a legally recognized non-agency capacity. (Adopted 1/95, Amended 1/07)
REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.
REALTORS®, when seeking to become a buyer/tenant representative, shall not mislead buyers or tenants
as to savings or other benefits that might be realized through use of the REALTOR®'s services. (Amended
1/93)
REALTORS® may represent the seller/landlord and buyer/tenant in the same transaction only after full
disclosure to and with informed consent of both parties. (Adopted 1/93)
REALTORS® shall submit offers and counter-offers objectively and as quickly as possible. (Adopted 1/93,
Amended 1/95)
When acting as listing brokers, Realtors® shall continue to submit to the seller/landlord all offers and
counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in
writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the
listing broker shall provide, as soon as practical, a written affirmation to the cooperating broker stating
that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord
has waived the obligation to have the offer presented. Realtors® shall not be obligated to continue to
market the property after an offer has been accepted by the seller/landlord. Realtors® shall recommend that
sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where
the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended
1/20)
REALTORS®, acting as agents or brokers of buyers/tenants, shall submit to buyers/tenants all offers and
counter-offers until acceptance but have no obligation to continue to show properties to their clients after
an offer has been accepted unless otherwise agreed in writing. Upon the written request of the listing broker
who submits a counter-offer to the buyer's tenant's broker, the buyer's/tenant's broker shall provide, as soon
as practical, a written affirmation to the listing broker stating that the counter-offer has been submitted to
the buyers/tenants, or a written notification that the buyers/tenants have waived the obligation to have the
counter-offer presented. REALTORS®, acting as agents or brokers of buyers/tenants, shall recommend that
buyers/tenants obtain the advice of legal counsel if there is a question as to whether a pre-existing contract
has been terminated. (Adopted 1/93, Amended 1/22)
The obligation of REALTORS® to preserve confidential information (as defined by state law) provided by
their clients in the course of any agency relationship or non-agency relationship recognized by law continues
Duties to Clients and Customers 56

after termination of agency relationships or any non-agency relationships recognized by law. REALTORS®
shall not knowingly, during or following the termination of professional relationships with their clients:
1. reveal confidential information of clients; or
2. use confidential information of clients to the disadvantage of clients; or
3. use confidential information of clients for the REALTOR®'s advantage or the advantage of third parties
unless:
• clients consent after full disclosure; or
• REALTORS® are required by court order; or
• it is the intention of a client to commit a crime and the information is necessary to prevent the crime;
or
• it is necessary to defend a REALTOR® or the REALTOR®'s employees or associates against an

accusation of wrongful conduct.
Information concerning latent material defects is not considered confidential information under this Code of
Ethics. (Adopted 1/93, Amended 1/01)
REALTORS® shall, consistent with the terms and conditions of their real estate licensure and their property
management agreement, competently manage the property of clients with due regard for the rights, safety
and health of tenants and others lawfully on the premises. (Adopted 1/95, Amended 1/00)
REALTORS® who are employed to maintain or manage a client's property shall exercise due diligence and
make reasonable efforts to protect it against reasonably foreseeable contingencies and losses. (Adopted 1/95)
When entering into listing contracts, REALTORS® must advise sellers/landlords of:
1. the REALTOR®'s company policies regarding cooperation and the amount(s) of any compensation that
will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency
capacities;
2. the fact that buyer/tenant agents or brokers, even if compensated by listing brokers, or by sellers/land
lords may represent the interests of buyers/tenants; and
3. any potential for listing brokers to act as disclosed dual agents, e.g. buyer/tenant agents. (Adopted 1/93,
Renumbered 1/98, Amended 1/03)
When entering into buyer/tenant agreements, REALTORS® must advise potential clients of:
1. the REALTOR®'s company policies regarding cooperation;
2. the amount of compensation to be paid by the client;
57 Duties to Clients and Customers

3. the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or
from other parties;
4. any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g. listing broker,
subagent, landlord's agent, etc., and
5. the possibility that sellers or sellers' representatives may not treat the existence, terms, or conditions
of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality
agreement between the parties. (Adopted 1/93, Renumbered 1/98, Amended 1/06)
Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal
or valuation. (Adopted 1/02)
REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval,
disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also
disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or
by a cooperating broker. (Adopted 1/03, Amended 1/09)
REALTORS® shall not use, or permit or enable others to use, listed or managed property on terms or
conditions other than those authorized by the owner or seller. (Adopted 1/12)
Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the
property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the
property, to advise on matters outside the scope of their real estate license, or to disclose facts which are
confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)
REALTORS® shall only be obligated to discover and disclose adverse factors reasonably apparent to someone
with expertise in those areas required by their real estate licensing authority. Article 2 does not impose upon
the REALTOR® the obligation of expertise in other professional or technical disciplines. (Amended 1/96)
(Renumbered as Standard of Practice 1-12 1/98)
(Renumbered as Standard of Practice 1-13 1/98)
REALTORS® shall not be parties to the naming of a false consideration in any document, unless it be the
naming of an obviously nominal consideration.

Factors defined as "non-material" by law or regulation or which are expressly referenced in law or regulation
as not being subject to disclosure are considered not "pertinent" for purposes of Article 2. (Adopted 1/93)
Article 3
REALTORS® shall cooperate with other brokers except when cooperation is not in the client's best interest.
The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise
compensate another broker. (Amended 1/95)
REALTORS®, acting as exclusive agents or brokers of sellers/ landlords, establish the terms and conditions
of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume
that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be
ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation. (Amended
1/99)
Any change in compensation offered for cooperative services must be communicated to the other REALTOR®
prior to the time that REALTOR® submits an offer to purchase/lease the property. After a REALTOR® has
submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify
the offered compensation with respect to that cooperative transaction. (Amended 1/14)
Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an
agreement to change cooperative compensation. (Adopted 1/94)
REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual
or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the
listing broker's firm is the procuring cause of sale/lease and a different amount of commission is payable if the
sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall,
as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall,
in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative
transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker
is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their
client before the client makes an offer to purchase or lease. (Amended 1/02)
It is the obligation of subagents to promptly disclose all pertinent facts to the principal's agent prior to as
well as after a purchase or lease agreement is executed. (Amended 1/93)
REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies,
to any broker seeking cooperation. (Adopted 5/86, Amended 1/04)

When seeking information from another REALTOR® concerning property under a management or listing
agreement, REALTORS® shall disclose their REALTOR® status and whether their interest is personal or
on behalf of a client and, if on behalf of a client, their relationship with the client. (Amended 1/11)
REALTORS® shall not misrepresent the availability of access to show or inspect a listed property. (Amended
11/87)
REALTORS® shall not provide access to listed property on terms other than those established by the owner
or the seller. (Adopted 1/10, Amended 1/23)
The duty to cooperate established in Article 3 relates to the obligation to share information on listed property,
and to make property available to other brokers for showing to prospective purchasers/tenants when it is in
the best interests of sellers/landlords. (Adopted 1/11)
REALTORS® may not refuse to cooperate on the basis of a broker's race, color, religion, sex, disability,
familial status, national origin, sexual orientation, or gender identity. (Adopted 1/20, Amended 1/23)
Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their
immediate families, their firms or any member thereof, or any entities in which they have any ownership
interest, any real property without making their true position known to the owner or the owner's agent or
broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their
ownership or interest in writing to the purchaser or the purchaser's representative. (Amended 1/00)
For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by
REALTORS® prior to the signing of any contract. (Adopted 2/86)

Article 5
REALTORS® shall not undertake to provide professional services concerning a property or its value where
they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.
Article 6
REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client,
without the client's knowledge and consent.
When recommending real estate products or services (e.g., homeowner's insurance, warranty programs,
mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the
recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR®
or REALTOR®'s firm may receive as a direct result of such recommendation. (Amended 1/99)
REALTORS® shall not recommend or suggest to a client or a customer the use of services of another
organization or business entity in which they have a direct interest without disclosing such interest at the
time of the recommendation or suggestion. (Amended 5/88)
Article 7
In a transaction, REALTORS® shall not accept compensation from more than one party, even if permitted
by law, without disclosure to all parties and the informed consent of the REALTOR®'s client or clients.
(Amended 1/93)
Article 8
REALTORS® shall keep in a special account in an appropriate financial institution, separated from their
own funds, monies coming into their possession in trust for other persons, such as escrows, trust funds,
clients' monies, and other like items.
Article 9
REALTORS®, for the protection of all parties, shall assure whenever possible that all agreements related
to real estate transactions including, but not limited to, listing and representation agreements, purchase
contracts, and leases are in writing in clear and understandable language expressing the specific terms,
conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each
party to such agreements upon their signing or initialing. (Amended 1/04)
For the protection of all parties, REALTORS® shall use reasonable care to ensure that documents pertaining
to the purchase, sale, or lease of real estate are kept current through the use of written extensions or
amendments. (Amended 1/93)

When assisting or enabling a client or customer in establishing a contractual relationship (e.g., listing and
representation agreements, purchase agreements, leases, etc.) electronically, REALTORS® shall make rea
sonable efforts to explain the nature and disclose the specific terms of the contractual relationship being
established prior to it being agreed to by a contracting party. (Adopted 1/07)
Duties to the Public
Article 10
REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion,
sex, disability, familial status, national origin, sexual orientation, or gender identity. REALTORS® shall not
be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color,
religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Amended
1/23)
REALTORS®, in their real estate employment practices, shall not discriminate against any person or persons
on the basis of race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender
identity. (Amended 1/23)
When involved in the sale or lease of a residence, REALTORS® shall not volunteer information regarding
the racial, religious or ethnic composition of any neighborhood nor shall they engage in any activity which
may result in panic selling, however, REALTORS® may provide other demographic information. (Adopted
1/94, Amended 1/06)
When not involved in the sale or lease of a residence, REALTORS® may provide demographic information
related to a property, transaction or professional assignment to a party if such demographic information is
(a) deemed by the REALTOR® to be needed to assist with or complete, in a manner consistent with Article
10, a real estate transaction or professional assignment and (b) is obtained or derived from a recognized,
reliable, independent, and impartial source. The source of such information and any additions, deletions,
modifications, interpretations, or other changes shall be disclosed in reasonable detail. (Adopted 1/05,
Renumbered 1/06)
REALTORS® shall not print, display or circulate any statement or advertisement with respect to selling
or renting of a property that indicates any preference, limitations or discrimination based on race, color,
religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Adopted 1/94,
Renumbered 1/05 and 1/06, Amended 1/23)

As used in Article 10 "real estate employment practices" relates to employees and independent contractors
providing real estate-related services and the administrative and clerical staff directly supporting those
individuals. (Adopted 1/00, Renumbered 1/05)
REALTORS® must not use harassing speech, hate speech, epithets, or slurs based on race, color, religion,
sex, disability, familial status, national origin, sexual orientation, or gender identity. (Adopted and effective
November 13, 2020, Amended 1/23)
Article 11
The services which REALTORS® provide to their clients and customers shall conform to the standards of
practice and competence which are reasonably expected in the specific real estate disciplines in which they
engage; specifically, residential real estate brokerage, real property management, commercial and industrial
real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication,
real estate auction, and international real estate.
REALTORS® shall not undertake to provide specialized professional services concerning a type of property
or service that is outside their field of competence unless they engage the assistance of one who is competent
on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged
to provide such assistance shall be so identified to the client and their contribution to the assignment should
be set forth. (Amended 1/10)
When REALTORS® prepare opinions of real property value or price they must:
1. be knowledgeable about the type of property being valued,
2. have access to the information and resources necessary to formulate an accurate opinion, and
3. be familiar with the area where the subject property is located
unless lack of any of these is disclosed to the party requesting the opinion in advance.
When an opinion of value or price is prepared other than in pursuit of a listing or to assist a potential
purchaser in formulating a purchase offer, the opinion shall include the following unless the party requesting
the opinion requires a specific type of report or different data set:
1. identification of the subject property
2. date prepared
3. defined value or price
4. limiting conditions, including statements of purpose(s) and intended user(s)
5. any present or contemplated interest, including the possibility of representing the seller/landlord or
buyers/tenants
6. basis for the opinion, including applicable market data
63 Duties to the Public

7. if the opinion is not an appraisal, a statement to that effect
8. disclosure of whether and when a physical inspection of the property's exterior was conducted
9. disclosure of whether and when a physical inspection of the property's interior was conducted
10. disclosure of whether the REALTOR® has any conflicts of interest (Amended 1/14)
The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be
interpreted and applied in accordance with the standards of competence and practice which clients and the
public reasonably require to protect their rights and interests considering the complexity of the transaction,
the availability of expert assistance, and, where the REALTOR® is an agent or subagent, the obligations of
a fiduciary. (Adopted 1/95)
When REALTORS® provide consultive services to clients which involve advice or counsel for a fee (not a
commission), such advice shall be rendered in an objective manner and the fee shall not be contingent on the
substance of the advice or counsel given. If brokerage or transaction services are to be provided in addition
to consultive services, a separate compensation may be paid with prior agreement between the client and
REALTOR®. (Adopted 1/96)
The competency required by Article 11 relates to services contracted for between REALTORS® and their
clients or customers; the duties expressly imposed by the Code of Ethics; and the duties imposed by law or
regulation. (Adopted 1/02)
Article 12
REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture
in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as
real estate professionals is readily apparent in their advertising, marketing, and other representations, and
that the recipients of all real estate communications are, or have been, notified that those communications
are from a real estate professional. (Amended 1/08)
REALTORS® must not represent that their brokerage services to a client or customer are free or available
at no cost to their clients, unless the REALTOR® will receive no financial compensation from any source
for those services. (Amended 1/22)
(Deleted 1/20)
The offering of premiums, prizes, merchandise discounts or other inducements to list, sell, purchase, or
lease is not, in itself, unethical even if receipt of the benefit is contingent on listing, selling, purchasing, or
leasing through the REALTOR® making the offer. However, REALTORS® must exercise care and candor
Duties to the Public 64

in any such advertising or other public or private representations so that any party interested in receiving
or otherwise benefiting from the REALTOR®'s offer will have clear, thorough, advance understanding of
all the terms and conditions of the offer. The offering of any inducements to do business is subject to the
limitations and restrictions of state law and the ethical obligations established by any applicable Standard
of Practice. (Amended 1/95)
REALTORS® shall not offer for sale/lease or advertise property without authority. When acting as listing
brokers or as subagents, REALTORS® shall not quote a price different from that agreed upon with the
seller/landlord. (Amended 1/93)
Realtors® shall not advertise nor permit any person employed by or affiliated with them to advertise real
estate services or listed property in any medium (e.g., electronically, print, radio, television, etc.) without
disclosing the name of that Realtor®'s firm in a reasonable and readily apparent manner either in the
advertisement or in electronic advertising via a link to a display with all required disclosures. (Adopted
11/86, Amended 1/16)
REALTORS®, when advertising unlisted real property for sale/lease in which they have an ownership in
terest, shall disclose their status as both owners/landlords and as REALTORS® or real estate licensees.
(Amended 1/93)
Only REALTORS® who participated in the transaction as the listing broker or cooperating broker (selling
broker) may claim to have "sold" the property. Prior to closing, a cooperating broker may post a "sold" sign
only with the consent of the listing broker. (Amended 1/96)
The obligation to present a true picture in representations to the public includes information presented,
provided, or displayed on REALTORS®' websites. REALTORS® shall use reasonable efforts to ensure that
information on their websites is current. When it becomes apparent that information on a REALTOR®'s
website is no longer current or accurate, REALTORS® shall promptly take corrective action. (Adopted
1/07)
REALTOR® firm websites shall disclose the firm's name and state(s) of licensure in a reasonable and readily
apparent manner.Websites of REALTORS® and non-member licensees affiliated with a REALTOR® firm
shall disclose the firm's name and that REALTOR®'s or non-member licensee's state(s) of licensure in a
reasonable and readily apparent manner. (Adopted 1/07)
REALTORS®' obligation to present a true picture in their advertising and representations to the public
includes Internet content, images, and the URLs and domain names they use, and prohibits REALTORS®
from:

1. engaging in deceptive or unauthorized framing of real estate brokerage websites;
2. manipulating (e.g., presenting content developed by others) listing and other content in any way that
produces a deceptive or misleading result;
3. deceptively using metatags, keywords or other devices/methods to direct, drive, or divert Internet traffic;
or
4. presenting content developed by others without either attribution or without permission, or
5. otherwise misleading consumers, including use of misleading images. (Adopted 1/07, Amended 1/18)
REALTORS® intending to share or sell consumer information gathered via the Internet shall disclose that
possibility in a reasonable and readily apparent manner. (Adopted 1/07)
REALTORS® shall not:
1. use URLs or domain names that present less than a true picture, or
2. register URLs or domain names which, if used, would present less than a true picture. (Adopted 1/08)
The obligation to present a true picture in advertising, marketing, and representations allows REALTORS®
to use and display only professional designations, certifications, and other credentials to which they are
legitimately entitled. (Adopted 1/08)
Article 13
REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall rec
ommend that legal counsel be obtained when the interest of any party to the transaction requires it.
Article 14
If charged with unethical practice or asked to present evidence or to cooperate in any other way, in any
professional standards proceeding or investigation, REALTORS® shall place all pertinent facts before the
proper tribunals of the Member Board or affiliated institute, society, or council in which membership is held
and shall take no action to disrupt or obstruct such processes. (Amended 1/99)
REALTORS® shall not be subject to disciplinary proceedings in more than one Board of REALTORS® or
affiliated institute, society or council in which they hold membership with respect to alleged violations of
the Code of Ethics relating to the same transaction or event. (Amended 1/95)
Duties to the Public 66

REALTORS® shall not make any unauthorized disclosure or dissemination of the allegations, findings, or
decision developed in connection with an ethics hearing or appeal or in connection with an arbitration hearing
or procedural review. (Amended 1/92)
REALTORS® shall not obstruct the Board's investigative or professional standards proceedings by institut
ing or threatening to institute actions for libel, slander or defamation against any party to a professional
standards proceeding or their witnesses based on the filing of an arbitration request, an ethics complaint, or
testimony given before any tribunal. (Adopted 11/87, Amended 1/99)
REALTORS® shall not intentionally impede the Board's investigative or disciplinary proceedings by filing
multiple ethics complaints based on the same event or transaction. (Adopted 11/88)
Duties to REALTORS®
Article 15
REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate
professionals, their businesses, or their business practices. (Amended 1/12)
REALTORS® shall not knowingly or recklessly file false or unfounded ethics complaints. (Adopted 1/00)
their businesses and their business practices includes the duty to not knowingly or recklessly publish, repeat,
retransmit, or republish false or misleading statements made by others. This duty applies whether false or
misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by
any other means. (Amended 1/12)
their businesses, and their business practices includes the duty to publish a clarification about or to remove
statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the
statement is false or misleading. (Amended 1/12)

Article 16
REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation
or exclusive brokerage relationship agreements that other REALTORS® have with clients. (Amended 1/04)
Article 16 is not intended to prohibit aggressive or innovative business practices which are otherwise ethical
and does not prohibit disagreements with other REALTORS® involving commission, fees, compensation or
other forms of payment or expenses. (Adopted 1/93, Amended 1/95)
Article 16 does not preclude REALTORS® from making general announcements to prospects describing
their services and the terms of their availability even though some recipients may have entered into agency
agreements or other exclusive relationships with another REALTOR®. A general telephone canvass, general
mailing or distribution addressed to all prospects in a given geographical area or in a given profession,
business, club, or organization, or other classification or group is deemed "general" for purposes of this
standard. (Amended 1/04)
Article 16 is intended to recognize as unethical two basic types of solicitations:
First, telephone or personal solicitations of property owners who have been identified by a real estate sign,
multiple listing compilation, or other information service as having exclusively listed their property with
another REALTOR®, and
Second, mail or other forms of written solicitations of prospects whose properties are exclusively listed with
another REALTOR® when such solicitations are not part of a general mailing but are directed specifically
to property owners identified through compilations of current listings, "for sale" or "for rent" signs, or other
sources of information required by Article 3 and Multiple Listing Service rules to be made available to other
REALTORS® under offers of subagency or cooperation. (Amended 1/04)
Article 16 does not preclude REALTORS® from contacting the client of another broker for the purpose of
offering to provide, or entering into a contract to provide, a different type of real estate service unrelated to
the type of service currently being provided (e.g., property management as opposed to brokerage) or from
offering the same type of service for property not subject to other brokers' exclusive agreements. However,
information received through a Multiple Listing Service or any other offer of cooperation may not be used
to target clients of other REALTORS® to whom such offers to provide services may be made. (Amended
1/04)
REALTORS® shall not solicit a listing which is currently listed exclusively with another broker. However, if
the listing broker, when asked by the REALTOR®, refuses to disclose the expiration date and nature of such
listing; i.e., an exclusive right to sell, an exclusive agency, open listing, or other form of contractual agreement
between the listing broker and the client, the REALTOR® may contact the owner to secure such information
and may discuss the terms upon which the REALTOR® might take a future listing or, alternatively, may
take a listing to become effective upon expiration of any existing exclusive listing. (Amended 1/94)
Duties to REALTORS® 68
REALTORS® shall not solicit buyer/tenant agreements from buyers/ tenants who are subject to exclusive
buyer/tenant agreements. However, if asked by a REALTOR®, the broker refuses to disclose the expiration
date of the exclusive buyer/tenant agreement, the REALTOR® may contact the buyer/tenant to secure such
information and may discuss the terms upon which the REALTOR® might enter into a future buyer/tenant
agreement or, alternatively, may enter into a buyer/tenant agreement to become effective upon the expiration
of any existing exclusive buyer/tenant agreement. (Adopted 1/94, Amended 1/98)
When REALTORS® are contacted by the client of another REALTOR® regarding the creation of an exclusive
relationship to provide the same type of service, and REALTORS® have not directly or indirectly initiated
such discussions, they may discuss the terms upon which they might enter into a future agreement or,
alternatively, may enter into an agreement which becomes effective upon expiration of any existing exclusive
agreement. (Amended 1/98)
The fact that a prospect has retained a REALTOR® as an exclusive representative or exclusive broker in
one or more past transactions does not preclude other REALTORS® from seeking such prospect's future
business. (Amended 1/04)
The fact that an exclusive agreement has been entered into with a REALTOR® shall not preclude or inhibit
any other REALTOR® from entering into a similar agreement after the expiration of the prior agreement.
(Amended 1/98)
REALTORS®, prior to entering into a representation agreement, have an affirmative obligation to make
reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to
provide the same type of real estate service. (Amended 1/04)
REALTORS®, acting as buyer or tenant representatives or brokers, shall disclose that relationship to the
seller/landlord's representative or broker at first contact and shall provide written confirmation of that
disclosure to the seller/landlord's representative or broker not later than execution of a purchase agreement
or lease. (Amended 1/04)
On unlisted property, REALTORS® acting as buyer/tenant representatives or brokers shall disclose that
relationship to the seller/landlord at first contact for that buyer/tenant and shall provide written confirma
tion of such disclosure to the seller/landlord not later than execution of any purchase or lease agreement.
(Amended 1/04)
REALTORS® shall make any request for anticipated compensation from the seller/ landlord at first contact.
(Amended 1/98)
REALTORS®, acting as representatives or brokers of sellers/landlords or as subagents of listing brokers, shall

disclose that relationship to buyers/tenants as soon as practicable and shall provide written confirmation of
69 Duties to REALTORS®
such disclosure to buyers/tenants not later than execution of any purchase or lease agreement. (Amended
1/04)
All dealings concerning property exclusively listed, or with buyer/tenants who are subject to an exclusive
agreement shall be carried on with the client's representative or broker, and not with the client, except with
the consent of the client's representative or broker or except where such dealings are initiated by the client.
Before providing substantive services (such as writing a purchase offer or presenting a CMA) to prospects,
REALTORS® shall ask prospects whether they are a party to any exclusive representation agreement. RE
ALTORS® shall not knowingly provide substantive services concerning a prospective transaction to prospects
who are parties to exclusive representation agreements, except with the consent of the prospects' exclusive
representatives or at the direction of prospects. (Adopted 1/93, Amended 1/04)
REALTORS® are free to enter into contractual relationships or to negotiate with sellers/ landlords, buy
ers/tenants or others who are not subject to an exclusive agreement but shall not knowingly obligate them
to pay more than one commission except with their informed consent. (Amended 1/98)
In cooperative transactions REALTORS® shall compensate cooperating REALTORS® (principal brokers)

and shall not compensate nor offer to compensate, directly or indirectly, any of the sales licensees employed
by or affiliated with other REALTORS® without the prior express knowledge and consent of the cooperating
broker.
REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of
an offer to purchase/lease to attempt to modify the listing broker's offer of compensation to subagents or
buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease
contingent on the listing broker's agreement to modify the offer of compensation. (Amended 1/04)
REALTORS®, acting as subagents or as buyer/tenant representatives or brokers, shall not attempt to extend
a listing broker's offer of cooperation and/or compensation to other brokers without the consent of the listing
broker. (Amended 1/04)
REALTORS® shall not use information obtained from listing brokers through offers to cooperate made
through multiple listing services or through other offers of cooperation to refer listing brokers' clients to other
brokers or to create buyer/tenant relationships with listing brokers' clients, unless such use is authorized by
listing brokers. (Amended 1/02)
Signs giving notice of property for sale, rent, lease, or exchange shall not be placed on property without
consent of the seller/landlord. (Amended 1/93)
REALTORS®, prior to or after their relationship with their current firm is terminated, shall not induce clients
of their current firm to cancel exclusive contractual agreements between the client and that firm. This
does not preclude REALTORS® (principals) from establishing agreements with their associated licensees
governing assignability of exclusive agreements. (Adopted 1/98, Amended 1/10)
Article 17
In the event of contractual disputes or specific non-contractual disputes as defined in Standard of Practice
17-4 between REALTORS® (principals) associated with different firms, arising out of their relationship as
REALTORS®, the REALTORS® shall mediate the dispute if the Board requires its members to mediate.
If the dispute is not resolved through mediation, or if mediation is not required, REALTORS® shall submit
the dispute to arbitration in accordance with the policies of their Board rather than litigate the matter.
In the event clients of REALTORS® wish to mediate or arbitrate contractual disputes arising out of real
estate transactions, REALTORS® shall mediate or arbitrate those disputes in accordance with the policies
of the Board, provided the clients agree to be bound by any resulting agreement or award.
The obligation to participate in mediation or arbitration contemplated by this Article includes the obligation
of REALTORS® (principals) to cause their firms to mediate or arbitrate and be bound by any resulting
agreement or award. (Amended 1/12)
The filing of litigation and refusal to withdraw from it by REALTORS® in an arbitrable matter constitutes
a refusal to arbitrate. (Adopted 2/86)
Article 17 does not require REALTORS® to mediate in those circumstances when all parties to the dispute
advise the Board in writing that they choose not to mediate through the Board's facilities. The fact that all
parties decline to participate in mediation does not relieve REALTORS® of the duty to arbitrate.
Article 17 does not require REALTORS® to arbitrate in those circumstances when all parties to the dispute
advise the Board in writing that they choose not to arbitrate before the Board. (Amended 1/12)
REALTORS®, when acting solely as principals in a real estate transaction, are not obligated to arbitrate
disputes with other REALTORS® absent a specific written agreement to the contrary. (Adopted 1/96)
Specific non-contractual disputes that are subject to arbitration pursuant to Article 17 are:
1. Where a listing broker has compensated a cooperating broker and another cooperating broker subse
quently claims to be the procuring cause of the sale or lease. In such cases the complainant may name
the first cooperating broker as respondent and arbitration may proceed without the listing broker being
named as a respondent. When arbitration occurs between two (or more) cooperating brokers and where
the listing broker is not a party, the amount in dispute and the amount of any potential resulting award
is limited to the amount paid to the respondent by the listing broker and any amount credited or paid to
a party to the transaction at the direction of the respondent. Alternatively, if the complaint is brought
against the listing broker, the listing broker may name the first cooperating broker as a third-party
respondent. In either instance the decision of the hearing panel as to procuring cause shall be conclu
sive with respect to all current or subsequent claims of the parties for compensation arising out of the
underlying cooperative transaction. (Adopted 1/97, Amended 1/07)
2. Where a buyer or tenant representative is compensated by the seller or landlord, and not by the listing
broker, and the listing broker, as a result, reduces the commission owed by the seller or landlord and,
subsequent to such actions, another cooperating broker claims to be the procuring cause of sale or lease.
In such cases the complainant may name the first cooperating broker as respondent and arbitration may
proceed without the listing broker being named as a respondent. When arbitration occurs between two
(or more) cooperating brokers and where the listing broker is not a party, the amount in dispute and the
amount of any potential resulting award is limited to the amount paid to the respondent by the seller or
landlord and any amount credited or paid to a party to the transaction at the direction of the respondent.
Alternatively, if the complaint is brought against the listing broker, the listing broker may name the first
cooperating broker as a third-party respondent. In either instance the decision of the hearing panel as
to procuring cause shall be conclusive with respect to all current or subsequent claims of the parties for
compensation arising out of the underlying cooperative transaction. (Adopted 1/97, Amended 1/07)
3. Where a buyer or tenant representative is compensated by the buyer or tenant and, as a result, the listing
broker reduces the commission owed by the seller or landlord and, subsequent to such actions, another
cooperating broker claims to be the procuring cause of sale or lease. In such cases the complainant may
name the first cooperating broker as respondent and arbitration may proceed without the listing broker
being named as a respondent. Alternatively, if the complaint is brought against the listing broker, the
listing broker may name the first cooperating broker as a third-party respondent. In either instance the
decision of the hearing panel as to procuring cause shall be conclusive with respect to all current or
subsequent claims of the parties for compensation arising out of the underlying cooperative transaction.
(Adopted 1/97)
4. Where two or more listing brokers claim entitlement to compensation pursuant to open listings with a
seller or landlord who agrees to participate in arbitration (or who requests arbitration) and who agrees
to be bound by the decision. In cases where one of the listing brokers has been compensated by the seller
or landlord, the other listing broker, as complainant, may name the first listing broker as respondent and
arbitration may proceed between the brokers. (Adopted 1/97)
5. Where a buyer or tenant representative is compensated by the seller or landlord, and not by the listing
broker, and the listing broker, as a result, reduces the commission owed by the seller or landlord and,
subsequent to such actions, claims to be the procuring cause of sale or lease. In such cases arbitration
shall be between the listing broker and the buyer or tenant representative and the amount in dispute is
limited to the amount of the reduction of commission to which the listing broker agreed. (Adopted 1/05)

The obligation to arbitrate established in Article 17 includes disputes between REALTORS® (principals)
in different states in instances where, absent an established inter-association arbitration agreement, the
REALTOR® (principal) requesting arbitration agrees to submit to the jurisdiction of, travel to, participate in,
and be bound by any resulting award rendered in arbitration conducted by the respondent(s) REALTOR®'s
association, in instances where the respondent(s) REALTOR®'s association determines that an arbitrable
issue exists. (Adopted 1/07)
Explanatory Notes
The reader should be aware of the following policies which have been approved by the Board of Directors of
the National Association:
In filing a charge of an alleged violation of the Code of Ethics by a REALTOR®, the charge must read as
an alleged violation of one or more Articles of the Code. Standards of Practice may be cited in support of
the charge.
The Standards of Practice serve to clarify the ethical obligations imposed by the various Articles and sup
plement, and do not substitute for, the Case Interpretations in Interpretations of the Code of Ethics.
Modifications to existing Standards of Practice and additional new Standards of Practice are approved from
time to time. Readers are cautioned to ensure that the most recent publications are utilized.
Appendix 2 - California
Business and Professions Code
10175.
Upon grounds provided in this article and the other articles of this chapter, the license of any real estate
licensee may be revoked or suspended in accordance with the provisions of this part relating to hearings.
(Added by Stats. 1943, Ch. 127.)
10175.2.
(a) If the Real Estate Commissioner determines that the public interest and public welfare will be adequately
served by permitting a real estate licensee to pay a monetary penalty to the department in lieu of an actual
license suspension, the commissioner may, on the petition of the licensee, stay the execution of all or some part
of the suspension on the condition that the licensee pay a monetary penalty and the further condition that
the licensee incur no other cause for disciplinary action within a period of time specified by the commissioner.
(b) The commissioner may exercise the discretion granted under subdivision (a) either with respect to a
suspension ordered by a decision after a contested hearing on an accusation against the licensee or by
stipulation with the licensee after the filing of an accusation, but prior to the rendering of a decision based
upon the accusation. In either case, the terms and conditions of the disciplinary action against the licensee
shall be made part of a formal decision of the commissioner.
(c) If a licensee fails to pay the monetary penalty in accordance with the terms and conditions of the decision
of the commissioner, the commissioner may, without a hearing, order the immediate execution of all or any
part of the stayed suspension in which event the licensee shall not be entitled to any repayment nor credit,
prorated or otherwise, for money paid to the department under the terms of the decision.
(d) The amount of the monetary penalty payable under this section shall not exceed two hundred fifty dollars
($250) for each day of suspension stayed nor a total of ten thousand dollars ($10,000) per decision regardless
of the number of days of suspension stayed under the decision.
(e) Any monetary penalty received by the department pursuant to this section shall be credited to the
Consumer Recovery Account of the Real Estate Fund.
(Amended by Stats. 2011, Ch. 712, Sec. 9. Effective January 1, 2012.)
10176.
The commissioner may, upon his or her own motion, and shall, upon the verified complaint in writing of
any person, investigate the actions of any person engaged in the business or acting in the capacity of a real
Appendix 2 - California Business and Professions Code
estate licensee within this state, and he or she may temporarily suspend or permanently revoke a real estate
license at any time where the licensee, while a real estate licensee, in performing or attempting to perform
any of the acts within the scope of this chapter has been guilty of any of the following:
(a) Making any substantial misrepresentation.
(b) Making any false promises of a character likely to influence, persuade, or induce.
(c) A continued and flagrant course of misrepresentation or making of false promises through licensees.
(d) Acting for more than one party in a transaction without the knowledge or consent of all parties thereto.
(e) Commingling with his or her own money or property the money or other property of others which is
received and held by him or her.
(f) Claiming, demanding, or receiving a fee, compensation, or commission under any exclusive agreement
authorizing a licensee to perform any acts set forth in Section 10131 for compensation or commission where
the agreement does not contain a definite, specified date of final and complete termination.
(g) The claiming or taking by a licensee of any secret or undisclosed amount of compensation, commission,
or profit or the failure of a licensee to reveal to the buyer or seller contracting with the licensee the full
amount of the licensee's compensation, commission, or profit under any agreement authorizing the licensee
to do any acts for which a license is required under this chapter for compensation or commission prior to or
coincident with the signing of an agreement evidencing the meeting of the minds of the contracting parties,
regardless of the form of the agreement, whether evidenced by documents in an escrow or by any other or
different procedure.
(h) The use by a licensee of any provision, which allows the licensee an option to purchase, in an agreement
with a buyer or seller that authorizes the licensee to sell, buy, or exchange real estate or a business opportunity
for compensation or commission, except when the licensee, prior to or coincident with election to exercise
the option to purchase, reveals in writing to the buyer or seller the full amount of the licensee's profit and
obtains the written consent of the buyer or seller approving the amount of the profit.
(i) Any other conduct, whether of the same or of a different character than specified in this section, which
constitutes fraud or dishonest dealing.
(j) Obtaining the signature of a prospective buyer to an agreement which provides that the prospective
buyer shall either transact the purchasing, leasing, renting, or exchanging of a business opportunity property
through the broker obtaining the signature, or pay a compensation to the broker if the property is purchased,
leased, rented, or exchanged without the broker first having obtained the written authorization of the owner
of the property concerned to offer the property for sale, lease, exchange, or rent.
(k) Failing to disburse funds in accordance with a commitment to make a mortgage loan that is accepted
by the applicant when the real estate broker represents to the applicant that the broker is either of the
following:
(1) The lender.
(2) Authorized to issue the commitment on behalf of the lender or lenders in the mortgage loan transaction.
(l) Intentionally delaying the closing of a mortgage loan for the sole purpose of increasing interest, costs,
fees, or charges payable by the borrower.
(m) Violating any section, division, or article of law which provides that a violation of that section, division,
or article of law by a licensed person is a violation of that person's licensing law, if it occurs within the scope
of that person's duties as a licensee.
(Amended by Stats. 2018, Ch. 285, Sec. 44. (AB 2884) Effective January 1, 2019.)
10176.1.
(a) (1) Whenever the commissioner takes any enforcement or disciplinary action against a licensee, and
the enforcement or disciplinary action is related to escrow services provided pursuant to paragraph (4) of
subdivision (a) of Section 17006 of the Financial Code, upon the action becoming final the commissioner
shall notify the Insurance Commissioner and the Commissioner of Financial Protection and Innovation of
the action or actions taken. The purpose of this notification is to alert the departments that enforcement
or disciplinary action has been taken, if the licensee seeks or obtains employment with entities regulated by
the departments.
(2) The commissioner shall provide the Insurance Commissioner and the Commissioner of Financial Protec
tion and Innovation, in addition to the notification of the action taken, with a copy of the written accusation,
statement of issues, or order issued or filed in the matter and, at the request of the Insurance Commissioner
or the Commissioner of Financial Protection and Innovation, with any underlying factual material relevant
to the enforcement or disciplinary action. Any confidential information provided by the commissioner to
the Insurance Commissioner or the Commissioner of Financial Protection and Innovation shall not be made
public pursuant to this section. Notwithstanding any other law, the disclosure of any underlying factual
material to the Insurance Commissioner or the Commissioner of Financial Protection and Innovation shall
not operate as a waiver of confidentiality or any privilege that the commissioner may assert.
(b) The commissioner shall establish and maintain, on the internet website maintained by the Department
of Real Estate, a database of its licensees, including those who have been subject to any enforcement or
disciplinary action that triggers the notification requirements of this section. The database shall also contain
a direct link to the databases, described in Section 17423.1 of the Financial Code and Section 12414.31 of
the Insurance Code and required to be maintained on the internet websites of the Department of Financial
Protection and Innovation and the Department of Insurance, respectively, of persons who have been subject
to enforcement or disciplinary action for malfeasance or misconduct related to the escrow industry by the
Insurance Commissioner and the Commissioner of Financial Protection and Innovation.
(c) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State
of California, the Department of Real Estate, the Real Estate Commissioner, any other state agency, or any
officer, agent, employee, consultant, or contractor of the state, for the release of any false or unauthorized
information pursuant to this section, unless the release of that information was done with knowledge and
malice, or for the failure to release any information pursuant to this section.
(Amended by Stats. 2021, Ch. 431, Sec. 18. (SB 800) Effective January 1, 2022.)
10176.5.
(a) The commissioner may, upon his or her own motion, and shall upon receiving a verified complaint in
writing from any person, investigate an alleged violation of Article 1.5 (commencing with Section 1102) of
Chapter 2 of Title 4 of Part 4 of Division 2 of the Civil Code by any real estate licensee within this state. The
commissioner may suspend or revoke a licensee's license if the licensee acting under the license has willfully
or repeatedly violated any of the provisions of Article 1.5 (commencing with Section 1102) of Chapter 2 of
Title 4 of Part 4 of Division 2 of the Civil Code.
(b) Notwithstanding any other provision of Article 1.5 (commencing with Section 1102) of Chapter 2 of Title
4 of Part 4 of Division 2 of the Civil Code, and in lieu of any other civil remedy, subdivision (a) of this
section is the only remedy available for violations of Section 1102.6b of the Civil Code by any real estate
licensee within this state.
10177.
The commissioner may suspend or revoke the license of a real estate licensee, delay the renewal of a license
of a real estate licensee, or deny the issuance of a license to an applicant, who has done any of the following,
or may suspend or revoke the license of a corporation, delay the renewal of a license of a corporation, or deny
the issuance of a license to a corporation, if an officer, director, or person owning or controlling 10 percent
or more of the corporation's stock has done any of the following:
(a) Procured, or attempted to procure, a real estate license or license renewal, for themself or a salesperson,
by fraud, misrepresentation, or deceit, or by making a material misstatement of fact in an application for a
real estate license, license renewal, or reinstatement.
(b) (1) Entered a plea of guilty or no contest to, or been found guilty of, or been convicted of, a felony, or
a crime substantially related to the qualifications, functions, or duties of a real estate licensee, and the time
for appeal has elapsed or the judgment of conviction has been affirmed on appeal, irrespective of an order
granting probation following that conviction, suspending the imposition of sentence, or of a subsequent order
under Section 1203.4 of the Penal Code allowing that licensee to withdraw that licensee's plea of guilty and
to enter a plea of not guilty, or dismissing the accusation or information.
(2) Notwithstanding paragraph (1), and with the recognition that sentencing may not occur for months or
years following the entry of a guilty plea, the commissioner may suspend the license of a real estate licensee
upon the entry by the licensee of a guilty plea to any of the crimes described in paragraph (1). If the guilty
plea is withdrawn, the suspension shall be rescinded and the license reinstated to its status prior to the
suspension. The department shall notify a person whose license is subject to suspension pursuant to this
paragraph of that person's right to have the issue of the suspension heard in accordance with Section 10100.
(c) Knowingly authorized, directed, connived at, or aided in the publication, advertisement, distribution,
or circulation of a material false statement or representation concerning their designation or certification of
special education, credential, trade organization membership, or business, or concerning a business oppor
tunity or a land or subdivision, as defined in Chapter 1 (commencing with Section 11000) of Part 2, offered
for sale.
(d) Willfully disregarded or violated this part or Chapter 1 (commencing with Section 11000) of Part 2 or the
rules and regulations of the commissioner for the administration and enforcement of this part and Chapter
1 (commencing with Section 11000) of Part 2.
(e) Willfully used the term "realtor" or a trade name or insignia of membership in a real estate organization
of which the licensee is not a member.
(f) Acted or conducted themself in a manner that would have warranted the denial of their application for a
real estate license, either had a license denied or had a license issued by another agency of this state, another
state, or the federal government revoked, surrendered, or suspended, or received an order of debarment, for
acts that, if done by a real estate licensee, would be grounds for the suspension or revocation of a California
real estate license, if the action of denial, revocation, surrender, suspension, or debarment by the other agency
or entity was taken only after giving the licensee or applicant fair notice of the charges, an opportunity for
a hearing, and other due process protections comparable to the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340), Chapter 4 (commencing with Section 11370), and Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and only upon an express
finding of a violation of law by the agency or entity.
(g) Demonstrated negligence or incompetence in performing an act for which the officer, director, or person
is required to hold a license.
(h) As a broker licensee, failed to exercise reasonable supervision over the activities of that licensee's sales
persons, or, as the officer designated by a corporate broker licensee, failed to exercise reasonable supervision
and control of the activities of the corporation for which a real estate license is required.
(i) Used their employment by a governmental agency in a capacity giving access to records, other than public
records, in a manner that violates the confidential nature of the records.
(j) Engaged in any other conduct, whether of the same or of a different character than specified in this
section, that constitutes fraud or dishonest dealing.
(k) Violated any of the terms, conditions, restrictions, and limitations contained in an order granting a
restricted license.
(l) (1) Solicited or induced the sale, lease, or listing for sale or lease of residential property on the grounds,
wholly or in part, of loss of value, increase in crime, or decline of the quality of the schools due to the present
or prospective entry into the neighborhood of a person or persons having a characteristic listed in subdivision
(a) or (d) of Section 12955 of the Government Code, as those characteristics are defined in Sections 12926
and 12926.1 of, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955 of, and Section 12955.2
of, the Government Code.
(2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to
apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to
familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11,
and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section
4760 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall
apply to paragraph (1).
(m) Violated the Franchise Investment Law (Division 5 (commencing with Section 31000) of Title 4 of the
Corporations Code) or regulations of the Commissioner of Financial Protection and Innovation pertaining
thereto.
(n) Violated the Corporate Securities Law of 1968 (Division 1 (commencing with Section 25000) of Title 4
of the Corporations Code) or the regulations of the Commissioner of Financial Protection and Innovation
pertaining thereto.
(o) Failed to disclose to the buyer of real property, in a transaction in which the licensee is an agent for the
buyer, the nature and extent of a licensee's direct or indirect ownership interest in that real property. The
direct or indirect ownership interest in the property by a person related to the licensee by blood or marriage,
by an entity in which the licensee has an ownership interest, or by any other person with whom the licensee
has a special relationship shall be disclosed to the buyer.
(p) Violated Article 6 (commencing with Section 10237).
(q) Violated or failed to comply with Chapter 2 (commencing with Section 2920) of Title 14 of Part 4 of
Division 3 of the Civil Code, relating to mortgages.
If a real estate broker that is a corporation has not done any of the foregoing acts, either directly or
through its employees, agents, officers, directors, or persons owning or controlling 10 percent or more of
the corporation's stock, the commissioner may not deny the issuance or delay the renewal of a real estate
license to, or suspend or revoke the real estate license of, the corporation, provided that any offending
officer, director, or stockholder, who has done any of the foregoing acts individually and not on behalf of
the corporation, has been completely disassociated from any affiliation or ownership in the corporation. A
decision by the commissioner to delay the renewal of a real estate license shall toll the expiration of that
license until the results of any pending disciplinary actions against that licensee are final, or until the licensee
voluntarily surrenders the licensee's license, whichever is earlier.
(Amended by Stats. 2021, Ch. 431, Sec. 19. (SB 800) Effective January 1, 2022.)
10177.1.
The commissioner may, without a hearing, suspend the license of any person who procured the issuance of
the license to himself by fraud, misrepresentation, deceit, or by the making of any material misstatement of
fact in his application for such license.
The power of the commissioner under this section to order a suspension of a license shall expire 90 days after
the date of issuance of said license and the suspension itself shall remain in effect only until the effective date
of a decision of the commissioner after a hearing conducted pursuant to Section 10100 and the provisions of
this section.
A statement of issues as defined in Section 11504 of the Government Code shall be filed and served upon the
respondent with the order of suspension. Service by certified or registered mail directed to the respondent's
current address of record on file with the commissioner shall be effective service.
The respondent shall have 30 days after service of the order of suspension and statement of issues in which
to file with the commissioner a written request for hearing on the statement of issues filed against him. The
commissioner shall hold a hearing within 30 days after receipt of the request therefor unless the respondent
shall request or agree to a continuance thereof. If a hearing is not commenced within 30 days after receipt
of the request for hearing or on the date to which continued with the agreement of respondent, or if the
decision of the commissioner is not rendered within 30 days after completion of the hearing, the order of
suspension shall be vacated and set aside.
A hearing conducted under this section shall in all respects, except as otherwise expressly provided herein,
conform to the substantive and procedural provisions of Chapter 5 (commencing with Section 11500) of Part
1 of Division 3 of Title 2 of the Government Code applicable to a hearing on a statement of issues.
(Amended by Stats. 1972, Ch. 214.)
10177.2.
The commissioner may, upon his or her own motion, and shall, upon the verified complaint in writing of
any person, investigate the actions of any licensee, and he or she may suspend or revoke a real estate license
at any time where the licensee in performing or attempting to perform any of the acts within the scope of
Section 10131.6 has been guilty of any of the following acts:
(a) Has used a false or fictitious name, knowingly made any false statement, or knowingly concealed any
material fact, in any application for the registration of a mobilehome, or otherwise committed a fraud in
that application.
(b) Failed to provide for the delivery of a properly endorsed certificate of ownership or certificate of title of
a mobilehome from the seller to the buyer thereof.
(c) Has knowingly participated in the purchase, sale, or other acquisition or disposal of a stolen mobilehome.
(d) Has submitted a check, draft, or money order to the Department of Housing and Community Development
for any obligation or fee due the state and it is thereafter dishonored or refused payment upon presentation.
10177.3.
(a) No licensee shall knowingly or intentionally misrepresent the value of real property.
(b) No licensee that offers or provides an opinion of value of residential real property that is used as the basis
for the origination of a mortgage loan shall have a prohibited interest in that property, within the meaning
of Section 226.42(d) of Title 12 of the Code of Federal Regulations and the accompanying commentary
contained in Volume 75 of the Federal Register, page 66554, dated October 28, 2010.
(Added by Stats. 2011, Ch. 716, Sec. 2. Effective January 1, 2012.)
10177.4.
(a) Notwithstanding any other provision of law, the commissioner may, after hearing in accordance with this
part relating to hearings, suspend or revoke the license of a real estate licensee who claims, demands, or
receives a commission, fee, or other consideration, as compensation or inducement, for referral of customers
to any escrow agent, structural pest control firm, home protection company, title insurer, controlled escrow
company, or underwritten title company. A licensee may not be disciplined under any provision of this part
for reporting to the commissioner violations of this section by another licensee, unless the licensee making
the report had guilty knowledge of, or committed or participated in, the violation of this section.
(b) The term "other consideration" as used in this section does not include any of the following:
(1) Bona fide payments for goods or facilities actually furnished by a licensee or for services actually performed
by a licensee, provided these payments are reasonably related to the value of the goods, facilities, or services
furnished.
(2) Furnishing of documents, services, information, advertising, educational materials, or items of a like
nature that are customary in the real estate business and that relate to the product or services of the
furnisher and that are available on a similar and essentially equal basis to all customers or the agents of the
customers of the furnisher.
(3) Moderate expenses for food, meals, beverages, and similar items furnished to individual licensees or
groups or associations of licensees within a context of customary business, educational, or promotional
practices pertaining to the business of the furnisher.
(4) Items of a character and magnitude similar to those in paragraphs (2) and (3) that are promotional of
the furnisher's business customary in the real estate business, and available on a similar and essentially equal
basis to all customers, or the agents of the customers, of the furnisher.
(c) Nothing in this section shall relieve any licensee of the obligation of disclosure otherwise required by this
part.
10177.5.
When a final judgment is obtained in a civil action against any real estate licensee upon grounds of fraud,
misrepresentation, or deceit with reference to any transaction for which a license is required under this
division, the commissioner may, after hearing in accordance with the provisions of this part relating to
hearings, suspend or revoke the license of such real estate licensee.
10177.6.
When an agent undertakes to arrange financing in connection with a sale, lease, or exchange of real property,
or when a person or entity arranging financing in connection with the sale, lease, or exchange of real property
undertakes to act as an agent with respect to that property, that agent, person, or entity shall, within 24
hours, make a written disclosure of those roles to all parties to the sale, lease, or exchange, and any related
loan transaction. For purposes of this section, "agent" has the same meaning as defined in subdivision (a) of
Section 2079.13 of the Civil Code.
10178.
When any real estate salesperson is discharged by his or her responsible broker for a violation of any of the
provisions of this article prescribing a ground for disciplinary action, a certified written statement of the
facts with reference thereto shall be filed forthwith with the commissioner by the responsible broker, and
if the responsible broker fails to notify the commissioner as required by this section, the commissioner may
temporarily suspend or permanently revoke the real estate license of the responsible broker, in accordance
with the provisions of this part relating to hearings.
10179.
No violation of any of the provisions of this part relating to real estate or of Chapter 1 (commencing with
Section 11000) of Part 2 of this division by any real estate salesperson or employee of any licensed real
estate broker shall cause the revocation or suspension of the license of the responsible broker retaining the
salesperson or the broker employing the employee unless it appears upon a hearing by the commissioner that
the responsible broker or broker had guilty knowledge of the violation.
10180.
The commissioner may deny, suspend or revoke the real estate license of a corporation as to any officer or
agent acting under its license without revoking the license of the corporation.
10182.
As a condition to the reinstatement of a revoked or suspended license, the commissioner may require the
applicant to take and pass a qualifying examination.
(Added by Stats. 1955, Ch. 1243.)
10185.
Any person, including officers, directors, agents or employees of corporations, who willfully violates or know
ingly participates in the violation of this division shall be guilty of a misdemeanor punishable by a fine not
exceeding ten thousand dollars ($10,000), or by imprisonment in the county jail not exceeding six months,
or by a fine and imprisonment.
(Amended by Stats. 1987, Ch. 587, Sec. 2.)
10186.
(a) Following an administrative proceeding, or in connection with a stipulation, when the commissioner
grants the right to a license applicant or a licensee to apply for or to obtain a restricted license or restricted
mortgage loan originator license endorsement, the commissioner may, in addition to any other terms and
conditions placed upon the restricted licensee, require the restricted licensee to pay the monetary costs
associated with monitoring the licensed activities conducted by and pursuant to the restricted license or
restricted mortgage loan originator license endorsement.
(b) The commissioner may also require, as a condition precedent to the issuance of a restricted license
or restricted mortgage loan originator license endorsement, that the licensee pay monetary restitution to
any person who sustained damages by reason of the act or acts that led to the discipline imposed by the
commissioner.
(c) The commissioner shall not renew a license or a mortgage loan originator license endorsement, and may
deny an application for the removal of license restrictions or for the reinstatement of an unrestricted license,
if the licensee fails to pay all of the costs he or she is ordered to pay pursuant to this section.
(d) The commissioner shall not reinstate an unrestricted license or unrestricted mortgage loan originator
license endorsement, or remove restrictions from a license or license endorsement, if the petitioner has failed
to pay any costs he or she was ordered to pay pursuant to this section.
(e) The commissioner may require a holder of a restricted or revoked license, who petitions the commissioner
for reinstatement of his or her license pursuant to Section 11522 of the Government Code, to pay the
reasonable costs of processing the petition request.
(f) All costs recovered under this section shall be considered a reimbursement for costs incurred and shall be
deposited in the Real Estate Fund to be available, notwithstanding Section 10451, upon appropriation by
the Legislature.
10186.1.
(a) A license or an endorsement of the department shall be suspended automatically during any time that the
licensee is incarcerated after conviction of a felony, regardless of whether the conviction has been appealed.
The department shall, immediately upon receipt of the certified copy of the record of conviction, determine
whether the license or endorsement has been automatically suspended by virtue of the licensee's incarceration,
and if so, the duration of that suspension. The department shall notify the licensee of the suspension and of
the right to elect to have the issue of penalty heard as provided in subdivision (d).
(b) If after a hearing before an administrative law judge from the Office of Administrative Hearings it is
determined that the felony for which the licensee was convicted was substantially related to the qualifications,
functions, or duties of a licensee, the commissioner upon receipt of the certified copy of the record of
conviction, shall suspend the license or endorsement until the time for appeal has elapsed, if an appeal has
not been taken, or until the judgment of conviction has been affirmed on appeal or has otherwise become
final, and until further order of the department.
(c) Notwithstanding subdivision (b), a conviction of a charge of violating any federal statute or regulation or
any statute or regulation of this state regulating dangerous drugs or controlled substances, or a conviction
of Section 187, 261, 288, or former Section 262, of the Penal Code, shall be conclusively presumed to be
substantially related to the qualifications, functions, or duties of a licensee and a hearing shall not be held on
this issue. However, upon its own motion or for good cause shown, the commissioner may decline to impose
or may set aside the suspension when it appears to be in the interest of justice to do so, with due regard to
maintaining the integrity of, and confidence in, the practice regulated by the department.
(d) (1) Discipline may be ordered against a licensee in accordance with the laws and regulations of the
department when the time for appeal has elapsed, the judgment of conviction has been affirmed on appeal,
or an order granting probation is made suspending the imposition of sentence, irrespective of a subsequent
order under Section 1203.4 of the Penal Code allowing the person to withdraw a plea of guilty and to enter
a plea of not guilty, setting aside the verdict of guilty, or dismissing the accusation, complaint, information,
or indictment.
(2) The issue of penalty shall be heard by an administrative law judge from the Office of Administrative
Hearings. The hearing shall not be held until the judgment of conviction has become final or, irrespective
of a subsequent order under Section 1203.4 of the Penal Code, an order granting probation has been made
suspending the imposition of sentence, except that a licensee may, at the licensee's option, elect to have the
issue of penalty decided before those time periods have elapsed. Where the licensee so elects, the issue of
penalty shall be heard in the manner described in subdivision (b) at the hearing to determine whether the
conviction was substantially related to the qualifications, functions, or duties of a licensee. If the conviction of
a licensee who has made this election is overturned on appeal, any discipline ordered pursuant to this section
shall automatically cease. This subdivision does not prohibit the department from pursuing disciplinary
action based on any cause other than the overturned conviction.
(e) The record of the proceedings resulting in a conviction, including a transcript of the testimony in those
proceedings, may be received in evidence.
(f) Any other law setting forth a procedure for the suspension or revocation of a license or endorsement
issued by the department shall not apply to proceedings conducted pursuant to this section.
10186.2.
(a) (1) A licensee shall report any of the following to the department:
(A) The bringing of a criminal complaint, information, or indictment charging a felony against the licensee.
(B) The conviction of the licensee, including any verdict of guilty, or plea of guilty or no contest, of any
felony or misdemeanor.
(C) Any disciplinary action taken by another licensing entity or authority of this state or of another state
or an agency of the federal government.
(2) The report required by this subdivision shall be made in writing within 30 days of the date of the bringing
of the indictment or the charging of a felony, the conviction, or the disciplinary action.
(b) Failure to make a report required by this section shall constitute a cause for discipline.
10186.9.
Notwithstanding any other provision of law, on and after January 1, 2015, the department shall be subject
to review by the appropriate policy committees of the Legislature.

RE CA CE Ethics

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Ethics

1. Industry professional organizations, such as the National Association of REALTORS®

• California Business and Professions Code: All California licensees when

• California Department of Real Estate - Commissioner's Regulations: The Commissioner of the

Federal and State Legislation

• Civil Rights Act of 1866: Prohibits discrimination based on race.

3 Federal and State Legislation

• Country of national origin

• Handicapped individuals (disability)

• Familial Status (families with children under 18 and pregnant women)

• California Civil Code Section 53: Prohibits restrictive covenants.

Federal and State Legislation 4

9. Marital Status (ex: married, unmarried persons living together)

10. National Origin (your country of birth)

11. Ancestry (country of your parent's birth)

13. Source of Income (includes Section 8 and VASH vouchers)

14. Disability (mental and physical)

16. Medical Condition

17. Genetic Information

19. Primary Language

20. Immigration Status

21. Military or Veteran Status (effective January 1, 2020)

22. Arbitrary characteristics as protected under Unruh

23. Individual perceived to be a member of protected class

24. Individual associated with any members of protected class

5 Federal and State Legislation

Conduct in Restraint of Trade

Disclosure of Loan Costs in Obtaining Financing and

The Focus of State, Federal, and Regulatory Agencies

Federal and State Legislation 6

California Department of Real Estate

• Failure to Disclose Material Facts

• Multiple listing service internal rule violations

• Conflicts of interest between its members

• Ethical conduct with respect to clients and customers

• Ethical conduct with respect to the general public

• Ethical conduct with respect to other REALTORS®

7 The Focus of State, Federal, and Regulatory Agencies

The Focus of State, Federal, and Regulatory Agencies 8

Client vs. Customer vs. Prospect

• By the principal's ratification of an agent's previously unauthorized act.

Client vs. Customer vs. Prospect 10

Major Areas of Concern

In many cases, misrepresentation can also be an issue of nondisclosure or a conflict of interest.

• Making any substantial misrepresentation. 10176 (a)

11 Major Areas of Concern

The California Civil Code defines actual fraud as:

4. A promise made without any intention of performing it; or,

5. Any other act fitted to deceive.

The California Civil Code defines constructive fraud as:

1. Prohibited conduct with respect to clients and/or customers

2. Duties owed to the public

3. Duties owed to REALTORS®

Misrepresenting Market Value

REALTOR® Code of Ethics

Standard of Practice 1-3

Misrepresenting Market Value 16

Sellers can also instigate overpricing. Licensees are not prohibited

Overpricing by sellers occurs when an emotional opinion about

Under Standard 3-4, the listing broker has an affirmative oblig

During the mid-1980s, buyer's representation became the ac

Material facts or information about a property must be dis